[sokoloff]

a) It's hard to argue that the FMV is less than what the VC paid for it, though.

b) ISO/NQSO's are income only when exercised, not when vested. When the stock price is expected to climb (such as when you can vest pre-IPO and you're pretty sure you will IPO), then it's wisest to exercise as soon as you vest to start the clock on long term CG holding period, but the key moment for the IRS is exercise, not vest.

All of the above reflects only my understanding of US tax law from being a (non-founder) employee at 3 past startups with some kind of public exit (two acquisitions and one IPO).