Amen! I think he’s ok if he sits on what he’s exercised. He should consult a pro if he want more. 
If it from ISOs, he needs to know how much added AMTI will result and whether it will result in AMT and how much, preferably before deciding whether and how much to exercise and hold.
With a nonpublic company, ISO exercise and hold could result in a large AMT bill from which there is no escape from like with a public company (where one can sell the shares in the same tax year).
He exercised 2 years ago and it didn’t trigger AMT at the time, so he’s good.
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The company our S works for let employees that held ISOs expense time with CPAs that specialized in equity planning. Seems like that’s a thang in the Bay Area - nice benefit.
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The things that are thangs in The Bay, and to an extent LA are pretty mind blowing! 
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Hi - I have a question about FAFSA and stock options. Hope it is ok to post here! I am having a surprisingly 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 calculated 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.
Given the context of how I started the thread, all questions are welcome! 
Not an expert but I don’t think they would count. Options are non taxable unless exercised.
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That’s my take too. If they aren’t recognized by the IRS, they shouldn’t factor into the FAFSA. The FAFSA handbook does mention options, but I don’t know how you’d value them when they have no value until exercised.
That share of BRK.A that you bought for $260 in 1980 and never sold never generated a taxable event to be reported to the IRS, but would be considered to be worth more than that now.
Traded options on publicly-traded securities typically have non-zero value determined by options markets. Employee options on non-publicly-traded securities are much harder to value, but if the employee would rather have them than nothing, they have some value.
For tax purposes, you generally don’t owe taxes until you realize the gains from the options you hold by exercising them. However, all options are assets. They have values. Even if the options are out-of-money (i.e. no intrinsic values), they still have time values. When companies issue options, they account for their estimated cost of issuance on their balance sheets as liabilities. Their liabilities are your assets. The estimated value of their liabilities are the estimated value of your assets. If you’re required to report all your assets, it seems to me that you need to include such assets.
I agree wholeheartedly with you and @ucbalumnus, options, even unexercised, have value. The question is, would unexercised options be germane to the FAFSA if they aren’t to the IRS? There are different accounting rules for different situations. How would one count an underwater, unexercised option?
The other complicating dimension is that the options mentioned are in a private company. Until that company goes public or gets acquired by a publicly traded company they have no “real” value.
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I’m no FAFSA expert, so I don’t know whether FAFSA requires you to disclose all assets. If it does, then I think you need to report them, whether they’re taxable or not.
A typical FASFA filer probably can’t estimate the value of the options s/he received. S/he probably needs to ask the company that issued those options for their current fair market values.
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I’m no expert either. It’s probably best to consult someone who is. In the meantime, Google did lead me to a resource that says they need to be reported as if they were exercised. It’s number 20. Interesting. See below.
It’s true that the value of options issued by private companies is more difficult to estimate, but they still have values and the private companies that issue them still need to estimate their values for accounting purposes.
At the time of exercising the FMV should be listed on the options agreement. For the purposes of FMV now, they’d probably have to ask HR. If that like I posted is correct, and I have no reason to believe it isn’t, then they’d subtract the strike price from todays FMV.
Note that the FMV of the underlying security (the company stock) and the option on it are two different things.
Yes. The link I posted though said that they should be listed as though they were exercised to shares. Seems weird considering they are completely illiquid.
The value of an option has two components: 1) its current intrinsic value, which is the difference between the current price of the underlying asset (e.g. the company stock) and the strike; and 2) its time value, which depends on the volatilities of the underlying asset and the yield curve. The volatilities are often difficult to estimate. Even if the company has publicly traded options from which one can estimate the volatilities of those options, it still may be complicated by the restrictions on options issued to employees that the publicly traded options don’t have.