Which of the following is NOT eligible for incentive stock options?

Incentive stock options (ISOs) are a type of employee stock option that can provide tax benefits under specific conditions outlined in the Internal Revenue Code. To be eligible for ISOs, individuals must meet certain criteria primarily related to their employment status.

Employees are typically eligible for ISOs as they are considered part of the company’s workforce and contribute to its operations. This includes regular employees who are directly involved in the business's performance. Outside board members may also qualify for ISOs if they provide services that resemble those of employees, despite not being employed in a traditional sense.

However, partners in a business, especially in the context of a partnership, are not eligible for ISOs because the tax code specifically limits ISO grants to employees of the company issuing the stock. Partnerships are distinct from corporate structures, and partners often do not have the same status as corporate employees. They may receive different forms of compensation or equity that don’t fall under the ISO provisions.

Thus, the correct answer identifies partners in the business as ineligible for incentive stock options because they do not meet the established criteria set forth in the tax regulations governing ISOs.