REG 2 - Employee Stock Options

Question 1

Definition of Readily Ascertainable Value

Answer 1

1) if the option is traded on an established market
2) if all of the following conditions are met:
- the option is transferable
- the option is exercisable immediately in full when it is granted
- No conditions or restrictions that would have significant effect on the value
- the FV of the option privilege is readily ascertainable

Question 2

Nonqualified Options : Employee Taxation

Answer 2

If readily ascertainable value known:
Taxable on GRANT date

If unknown:
Taxable on EXERCISE date

Question 3

Nonqualified Options : Employer Taxation

Answer 3

Deduct/expense in same year the employee reports income

Question 4

Qualified Options : Employee Taxation

Answer 4

1) Incentive Stock Options
2) Employee Stock Purchase Plans

*Not taxable income/compensation. Taxable as capital gains when sold

Question 5

Qualified Options : Employer Taxation

Answer 5

No tax deduction