Can a tax levy seize unexercised, nontransferable stock options?
The IRS thinks so. Chief Counsel’s Memorandum 200926001 (1/9/09, released 6/26/09) discusses “Whether the IRS can enforce a regular levy served on the Taxpayer by seizing and selling executive stock options held by the Taxpayer.” Its answer: Yes, we can. The options at issue included both incentive stock options and nonqualified options. All of them were, by their terms, transferable only upon death or pursuant to a qualified domestic relations order. Nontransferability is mandatory for ISO’s, though not for nonqualified options. The IRS reasoned that options fall within the broad definition of “property” subject to seizure to satisfy tax liens and that, once they are seized, any restrictions on transfer may be ignored. The first point seems indisputable. The basis for the second is IRC §6331(b), which provides: “In any case in which the Secretary may levy upon property, or rights to property, he may seize and sell such property or rights to property (whether real or personal, tangible
