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R1 M6 Employee Stock Options (Nonqualified Plans (Readily ascertainable…
R1 M6 Employee Stock Options
Nonqualified Plans
Readily ascertainable value
OI
grant
= value of option - paid
AB = exercise price + OI
IF options lapse & previosly recongnized OI -> capital loss *
No readily ascertainble value
OI
exercise
= FMV
exercise
- exercise price - paid
AB = exercise price + OI
employers deduct OI in yr employee recongizes OI
Qualified Plans
ISO
requirements
approved by shareholders
grant in 10yrs of
approval
and exercised in 10yrs of
grant
execise price > FMV @ grant
employee owns < 10%
held 2yrs after
grant
1yr after exercise
remain employee 3 months before
exercise
taxation
no OI
grant
OR
exercise
AB = exercise price + paid
IF holding req NOT met -> OI = FMV
exercise
- exercise price
excercise up to 100k remainder is nonqualified
excess FMV
exercise
- exercise price is an amt preferance
ESPP
requirements
approved by shareholders
offered to all full-time employees who own <5% !
exercise price NOT < 85% FMV
exercise
OR
grant
no more than 25k per yr per employee
held 2yrs after
grant
& 1yr after
excercise
remain employee 3 months before exercise !
taxation
no OI
grant
or exersise
AB = exercise price + paid
IF holding req not met -> OI = FMV
exercise
- exercise price
IF exercise price < FMV
grant
-> lesser of FMV
sale
- exercise price OR exercise price - FMV
grant
employers recieve no deduction for qualified plans