...and Paying Uncle Sam SITUATION EMPLOYEE COMPANY NONQUALIFIED OPTION OPTION GRANTED No tax No deduction OPTION Difference between grant price and That same spread EXERCISED current market value taxed as deducted as com ordinary income pensation expense STOCK SOLD Post-exercise appreciation or No deduction decline taxed as capital gain or loss INCENTIVE STOCK OPTION (ISO) OPTION GRANTED No tax No deduction OPTION No tax unless federal alternative No deduction EXERCISED minimum tax applies STOCK SOLD Difference between exercise and No deduction sale price taxed as capital gain DATA: CONFERENCE BOARD; ROBERT SALWEN, EXECUTIVE COMPENSATION CORP.

Updated June 14, 1997 by bwwebmaster
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