R1 Stock Options Flashcards
Nonqualified options: when are they taxed the the employee? To the employer?
Nonqualified stock options are taxed to the employee when there is an ascertainable value. So if on the grant date, there is NO ascertainable value then it will be taxed on the exercise date.
Employee: taxed as ordinary income.
The employer may deduct nonqualified options as a business expense in the same year that the employee is taxed on it.
Nonqualified options: When there’s readily ascertainable value.
- When is it taxed to employee?
- How much is the tax amount?
- How to calc employee basis?
- When does holding period begin?
- What if employee never exercises?
Nonqualified option with readily ascertainable value at grant date.
When is it taxed to employee? Taxed on grant date.
How much is the tax amount? Ordinary inc = Value of option less cost to employee
How to calc employee basis? Basis = Exercise price + previously taxed amount
When does holding period begin? Holding period begins on exercise date.
What if employee never exercises? Results in capital loss @ value previously taxed.
Nonqualified option: without readiy ascertainable value.
- When is it taxed to employee?
- How much is the tax amount?
- How to calc employee basis?
- When does holding period begin?
- What if employee never exercises?
Nonqualified option without readily ascertainable value @ grant date.
When is it taxed to employee? Tax on exercise date.
How much is the tax amount? Ordinary income based on FMV of stock purchased less amount paid for the option.
How to calc employee basis? Basis = exercise price + ordinary income recognized.
When does holding period begin? Begins on exercise date.
What if employee never exercises? No tax consequences is never exercised.
