409A Valuation

Section 409A codifies standards for nonqualified deferred compensation. With narrow exclusions, any plan that defers taxable compensation for employees or service providers is covered, including stock appreciation rights and stock options. Nonstatutory stock options generally are taxable at the date of their exercise and not at their grant or vesting. Section 409A preserves this treatment, but only if it can be shown that the stock option is granted with an exercise price at or above the fair market value of the underlying stock on the date of grant. With certain limited exceptions, an option that is granted at a price deemed to be under fair market value will result in tax at vesting as opposed exercise, as well as an additional 20% tax on the optionee, and other potential penalties.

VMI has a proven track record in providing tax-related valuations. Our firm’s experience in private company valuations, coupled with our extensive experience providing valuations that are reviewed by the IRS, provides a solid foundation from which to provide 409A valuation services.