Taxation: Stock Options Flashcards
Another name for incentive stock options
Qualified stock options
Incentive stock options:
When exercised there is…
No taxable income
Incentive stock options:
Basis of stock
Basis of stock = option price (exercise price)
Incentive stock options:
When stock is sold…
Gain is long term capital gain
Incentive stock options:
The date options were granted to the date the stock was sold…
At least 2 years
Incentive stock options:
Date of exercise to date stock was sold…
Must be at least 1 year
NonQualified stock option plan:
If stock is held over 12 months?
Under 12 months?
Over 12 = LT capital gain
Under 12 months = ST capital gain
There is no income in incentive plan at…
Exercise date of option
An incentive stock option receives…
Favorable tax treatment
Incentive stock option plan:
The option must meet certain…
Technical requirements to qualify
Incentive stock option plan: no income is recognized by employee when..,
Option is granted or exercised
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
1 employee’s realized gain is LT capital gain
2 employer receives no deduction
Incentive stock option plan:
If the holding period requirements are not met, the employee has…
Ordinary income to extent that FMV at date of exercise exceeds
The option price
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…
Gain is ST or LT capital gain
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…
Employer receives deduction receives deduction equal to amount employee reports as ordinary income
An incentive stock option may be treated as…
A NonQualified stock option if corporation elects at time option is issued
NonQualified stock option is included…
In income when received if option has determinable FMV
NonQualified stock option:
If option has no ascertainable FV when received then…
income arises when option is exercised
NonQualified stock option:
If option has no ascertainable FV when received then income arises when option is exercised to the extent of…
Taxable income = (FV when exercised) - (option price)
NonQualified stock option:
Amount of income recognized (at receipt or when recognized) is…2
1 treated as ordinary income to employee and
2 employer is allowed deduction equal to amount included in employee’s income
Employee stock purchase plan that does not…
Discriminate against rank and file employees
Employee stock purchase plan:
There is no income when…
Employee receives or exercises option
Employee stock purchase plan:
Conditions for holding period 2
1 employer holds stock at least 2 years after option is granted
And
2 at least 1 year after exercise
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…
Ordinary income
Employee stock purchase plan:
If employee holds stock for required time the employee has ordinary income to the extent of the lesser of…2
1 FMV at time option granted over option price or
2 FMV at disposition over option price
Employee stock purchase plan:
Capital gains are recognized to the extent…
Gain exceeds ordinary income
Employee stock purchase plan:
If stock is not held, the employee has…2
1 Ordinary income at time of sake for difference between FV when exercised and option price
2 amount of ordinary income increases basis
Employee stock purchase plan:
If the stock is not held for the required time, the capital gain or loss is…
For the difference between selling price and increased basis
Incentive stock options are offered to…
All employees
