Can employee option stock be contributed to an IRA or Roth?

Posted February 23rd, 2010 by admin

(Correction to a previous post.)

Employees have asked me many times if they can escape tax for exercising their incentive stock options and non-qualified stock options by contributing the options to a Roth or regular IRA account. The general answer is no. You can’t assign earned income to a retirement account and escape taxation.

In addition, stock acquired using a stock option can’t be contributed to an IRA or Roth. According to Internal Revenue Code Section 219(e)(1), contributions, except for rollover contributions, must be in cash.

Also be aware that selling assets to your IRA or Roth is a prohibited transaction.