I am having a surprising difficult time finding the answer to this question. I work for a privately held company and have vested stock options. Again, this is for a privately held company so I cannot exercise these options until some sort of the qualifying event occurs (for instance, if the company were sold). Do I need to report these as assets on the FAFSA form? We have been provided with a calculate Fair Market Value for the options so I could calculate a value if I needed to - I am just not sure if this is required.
I am pretty sure you need to report the value. Here is the definition of asset, from the Federal Student Aid Handbook Application & Verification Guide:
An asset is property that the family owns and has an exchange value. The FAFSA form collects current data (as of the day of signing the FAFSA form) about cash, savings and checking accounts, investments, businesses, and investment farms. Most assets are investments such as college savings plans, Coverdell education savings accounts, real estate, installment and land sale contracts (including mortgages held), trust funds, mutual funds, money market funds, Uniform Gifts and Uniform Transfers to Minors (UGMA and UTMA) accounts, certificates of deposit, stocks, stock options, bonds, commodities, and precious metals. If the asset isn’t a business or investment farm, it is reported as an investment.
If these are Incentive Stock Options (ISOs) that are vested, but have yet to be exercised into shares, then they have no value. All you have is the option to buy the shares. I know the handbook lists them, but imagine a scenario where they are underwater. They have no real value until they are exercised.
If you have exercised the option to buy, and now own shares, saleable or not, I believe they would be categorized at FMV.
Options are weird. I have another thread on the exact topic. You might post the same question on that thread.
Yeah, I consider myself fortunate never to have had to determine whether or not some of the really squirrelly assets were properly reported. Too confusing for me!
I can see the logic in requiring vested options for a public company to be reported - i could theoretically exercise the options, call a broker, and make a profit on the difference between the strike price and the market price. But for a private company there is no actual way to exercise the options and sell the resulting stock, so it does not make sense to me that these options would need to be reported.
Options generally can have non-zero value, although the valuation formula for a tradable option on a publicly traded security would not be the same as for an ISO on a currently non-tradable security.
They have a calculable value to the issuing company too, even if it’s private. I think in this context though they wouldn’t have a reportable value for FAFSA.