What is the accounting treatment of legal fees incurred relating to a stock issuance?

Let me give you the technical GAAP answer and fill in some practical guidance also. GAAP allows for two acceptable answers for your question. Legal fees associated with stock issuance may be expensed as incurred, or offset against the proceeds raised. As a practical matter, most companies choose to offset them against the proceeds, since that doesn't flow through the P&L. Also, as a practical matter, I've only seen that treatment in connection with material fundraising, such as a round of preferred stock or some other stock offering. Fees associated with small transactions such as exercise of stock options typically are not material, and therefore are just expensed as incurred.