Form 3921 is the statement a company sends when you exercise an incentive stock option (ISO). It records the grant date, exercise date, exercise price, the stock's fair market value on the exercise date and the number of shares. You don't usually pay regular tax when you exercise, but the gap between that value and your price can trigger alternative minimum tax, and the form is what you'll use to work out the tax when you sell.
If you work for a startup or a listed company that grants ISOs, this form arrives early in the year after you exercise. It's easy to file away and forget. Don't: the numbers on it decide whether your eventual gain is capital gain or wages. Everything here comes from the IRS Instructions for Forms 3921 and 3922 (04/2025), Publication 525 and Tax Topic 427.
Who sends Form 3921
Every corporation that, in a calendar year, transfers shares to someone exercising an ISO under section 422(b) must file Form 3921 for each transfer that year and give the employee a copy. The 'corporation' can include the issuer, a related company, an agent or a broker handling the shares.
There's one exception: no Form 3921 is needed for an employee who's a nonresident alien and who didn't have to get a Form W-2 from the company in any year from the year of grant to the year of exercise.
The six boxes
| Box | What it shows | Why it matters to you |
|---|---|---|
| 1 | Date option granted | Starts the 2-year clock of the holding period |
| 2 | Date option exercised | Starts the 1-year clock; your holding period begins the day after |
| 3 | Exercise price per share | Your regular tax basis in the shares |
| 4 | Fair market value per share on exercise date | Box 4 minus box 3 is the spread used for AMT and for a disqualifying sale |
| 5 | Number of shares transferred | Multiply the per-share figures by this |
| 6 | Corporation that issued the stock, if not the transferor | Only filled in when a different entity transferred the shares |
Exercising: no regular tax, but watch the AMT
Topic 427 is clear that with a statutory option such as an ISO you generally don't include any amount in income when you receive or exercise it. The catch is the alternative minimum tax. The spread on exercise can be an AMT adjustment on Form 6251, which is why big exercises in one year can produce a surprise bill.
Publication 525 works an example, and the figures here are the IRS's own as of October 2026. Elm Company grants an ISO on April 8, 2024 for 100 shares at $9. The employee exercises on January 7, 2025 when the shares trade at $14, and the rights become transferable on January 27, 2025 at $16. The AMT adjustment is $700: the $1,600 value when the rights became transferable minus the $900 option price. Your AMT basis and regular basis will then differ, so keep records of both.
Selling: the holding period decides everything
You meet the holding period if you don't sell until the later of 2 years after the grant date and 1 year after the shares were transferred to you.
| When you sell | How the gain is taxed |
|---|---|
| After the holding period | All capital gain or loss; your basis is the price you paid |
| Before the holding period, at a gain | Ordinary income up to the spread at exercise (box 4 minus box 3); any extra gain is capital gain |
| Before the holding period, at a loss | A capital loss, with no ordinary income |
When a sale is disqualifying, your employer should report the ordinary income as wages in box 1 of your W-2. Your broker's Form 1099-B may not include that amount in your basis for options granted on or after January 1, 2014, so it's your job to adjust the basis on Form 8949. Get that wrong and you're taxed twice on the same spread.
What to do with Form 3921 at tax time
- In the year you exercise, compare box 4 with box 3 for every exercise and total the spread. If it's large, work through Form 6251 to see whether the AMT applies.
- Record two bases for the shares: the regular basis (box 3) and the AMT basis, which includes any AMT adjustment.
- When you sell, find boxes 1 and 2 for those shares and check the holding period against the sale date.
- If the sale is disqualifying, make sure the ordinary income appears on your W-2, and add it to your basis on Form 8949.
- If the sale qualifies, report the whole gain as capital gain on Form 8949 and Schedule D.
If you exercised in several batches, you'll get a separate form for each transfer. Match each sale to the right form, because the dates and prices differ. A spreadsheet with one row per form, showing both dates, both prices and the share count, makes the sale year far less painful.
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Deadlines for the company
Form 3921 follows the general information return calendar. For 2025 transfers, statements had to reach employees by February 2, 2026, and the IRS copies were due on paper by March 2, 2026 or by March 31, 2026 if e-filed. Since 2024 a company filing 10 or more information returns in total has to e-file, and the IRS's IRIS portal is one way to do it.
The verdict
Keep every Form 3921 with your tax papers until you've sold those shares and filed that year's return. Before a large exercise, run the AMT numbers. Before a sale, check the two dates in boxes 1 and 2, because waiting a few extra weeks can turn wages into capital gain.
Frequently asked questions
Do I report Form 3921 on my tax return?
Not as a separate entry. You use it to work out any AMT adjustment in the year you exercise and your gain or ordinary income when you sell.
Is exercising an ISO taxable?
Generally not for regular income tax, but the spread between the market value and your price can trigger alternative minimum tax.
What is the ISO holding period?
You must hold the shares until the later of 2 years after the grant date and 1 year after the shares were transferred to you.
When should I receive Form 3921?
For 2025 exercises, companies had to furnish it by February 2, 2026.
