Thanks for the info but that sounds really complicated ..

Who will do the calculation for him? Does the IRS know or care when (in which month) the original poster gained his big income? I assume that his employer would withhold 25% of his gains in the form of Federal income tax due when the acquisition was consumated so his federal income tax would be lumpy on the IRS Tax receipt record.

I am in a similar situation - I exercised a fairly significant amount of incentive stock options that my employer awarded a while ago but they withheld too little federal tax on the gains, and I am pretty sure I will have to pay quite a bit of under withholding penalty, as well as possibly some interest.