Taxation: Stock Options

Question 1

Another name for incentive stock options

Answer 1

Qualified stock options

Question 2

Incentive stock options:

When exercised there is…

Answer 2

No taxable income

Question 3

Incentive stock options:

Basis of stock

Answer 3

Basis of stock = option price (exercise price)

Question 4

Incentive stock options:

When stock is sold…

Answer 4

Gain is long term capital gain

Question 5

Incentive stock options:

The date options were granted to the date the stock was sold…

Answer 5

At least 2 years

Question 6

Incentive stock options:

Date of exercise to date stock was sold…

Answer 6

Must be at least 1 year

Question 7

NonQualified stock option plan:

If stock is held over 12 months?

Under 12 months?

Answer 7

Over 12 = LT capital gain

Under 12 months = ST capital gain

Question 8

There is no income in incentive plan at…

Answer 8

Exercise date of option

Question 9

An incentive stock option receives…

Answer 9

Favorable tax treatment

Question 10

Incentive stock option plan:

The option must meet certain…

Answer 10

Technical requirements to qualify

Question 11

Incentive stock option plan: no income is recognized by employee when..,

Answer 11

Option is granted or exercised

Question 12

Incentive stock option plan:

If employee holds the stock acquired through exercise of the option at least 2 years from the date the option was granted and holds the stock itself at least 1 year…2

Answer 12

1 employee’s realized gain is LT capital gain

2 employer receives no deduction

Question 13

Incentive stock option plan:

If the holding period requirements are not met, the employee has…

Answer 13

Ordinary income to extent that FMV at date of exercise exceeds
The option price

Question 14

Incentive stock option plan:

If the holding period requirements above are not met, the employee has ordinary income to the extent that the FMV at date of exercise exceeds the option price. The remainder of…

Answer 14

Gain is ST or LT capital gain

Question 15

Incentive stock option plan:

If the holding period requirements above are not met, the employee has ordinary income to the extent that the FMV at date of exercise exceeds the option price. The employer…

Answer 15

Employer receives deduction receives deduction equal to amount employee reports as ordinary income

Question 16

An incentive stock option may be treated as…

Answer 16

A NonQualified stock option if corporation elects at time option is issued

Question 17

NonQualified stock option is included…

Answer 17

In income when received if option has determinable FMV

Question 18

NonQualified stock option:

If option has no ascertainable FV when received then…

Answer 18

income arises when option is exercised

Question 19

NonQualified stock option:

If option has no ascertainable FV when received then income arises when option is exercised to the extent of…

Answer 19

Taxable income = (FV when exercised) - (option price)

Question 20

NonQualified stock option:

Amount of income recognized (at receipt or when recognized) is…2

Answer 20

1 treated as ordinary income to employee and

2 employer is allowed deduction equal to amount included in employee’s income

Question 21

Employee stock purchase plan that does not…

Answer 21

Discriminate against rank and file employees

Question 22

Employee stock purchase plan:

There is no income when…

Answer 22

Employee receives or exercises option

Question 23

Employee stock purchase plan:

Conditions for holding period 2

Answer 23

1 employer holds stock at least 2 years after option is granted
And

2 at least 1 year after exercise

Question 24

Employee stock purchase plan:

If the employee holds the stock for at least 2 years after the option is granted and at least 1 year after exercise then employee has…

Answer 24

Ordinary income

Question 25

Employee stock purchase plan:

If employee holds stock for required time the employee has ordinary income to the extent of the lesser of…2

Answer 25

1 FMV at time option granted over option price or

2 FMV at disposition over option price

Question 26

Employee stock purchase plan:

Capital gains are recognized to the extent…

Answer 26

Gain exceeds ordinary income

Question 27

Employee stock purchase plan:

If stock is not held, the employee has…2

Answer 27

1 Ordinary income at time of sake for difference between FV when exercised and option price

2 amount of ordinary income increases basis

Question 28

Employee stock purchase plan:

If the stock is not held for the required time, the capital gain or loss is…

Answer 28

For the difference between selling price and increased basis

Question 29

Incentive stock options are offered to…

Answer 29

All employees