final_word_options - Although some would claim there is no...

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A final word on ISOs and NQOs Note: In all three stock option illustrations – incentive stock options, nonqualified stock options with a “readily ascertainable market value”, and nonqualified stock options without a market value – the taxpayer recognizes $9,490 of income. The difference between them is: (1) character – ordinary income vs. long-term capital gain treatment and (2) timing – is the income recognized now or later. The computations, also suggest that stock options may not always be an efficient form of compensation. The cost/benefit ratio is greater than 1.00 in each case.
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Unformatted text preview: Although, some would claim there is no real “cost” of granting employee stock options; other than the forgone cash since they “sold” the stock to their employees at a discount. They have been touted because they may both help retain and motivate employees and, in the past at least, could be used without having to show the cost as an expense on the GAAP financial statements. However, since 2006 companies must record the fair value of stock options as an expense on their income statements....
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This note was uploaded on 09/09/2011 for the course TAX 6845 taught by Professor Kelliher,c during the Fall '08 term at University of Central Florida.

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