[trungonnews]

What happen if the company goes bankrupt? What happen to the prepaid taxes on the ISO spread?

[harryh]

You get a credit that you can use to offset your taxes in future years.

[trungonnews]

Is it a capital gain credit? One with $3000/year deduction cap? If so, it can take a couple life times to fully redeem the prepaid tax credit.

[harryh]

Yes it's a capital loss. Which means you can use it to offset an unlimited amount of capital gains, but only 3k of ordinary income. So how long it takes to redeem could be a long time if you never incur capital gains.