If there is a difference between the tax expense originally accrued and the amount of taxes determined at the time of the exercise of an NQSO
, excess tax benefits will be created (see the journal entries in Exhibit 1).
tax, and LPs in private equity funds are often tax exempt, the NQSO
(8) Upon exercise, the employee must come up with the exercise price in after-tax dollars (as with the NQSO
) but suffers no regular income tax liability.
The tax implications of an NQSO
are governed by IRC Section 83.
Instead the ISO is treated like a NQSO
. (15) This means that the value of the stock acquired at the time of exercise in excess of the exercise cost creates a positive AMT adjustment in that year.
123(R), Share-Based Payment, poses a potential dilemma for companies with net operating losses (NOLs) that award nonqualified stock options (NQSOs
) as compensation.
Camden was granted a NQSO
to purchase 5,000 shares of Robin common stock for $10 per share.
If, at the time a NQSO
is exercised, the stock is deemed to be restricted, the taxation of the stock may be deferred until the restrictions lapse.
There are two kinds of options--ISOs and nonqualified stock options (NQSOs
COMPENSATORY nonqualified stock options (NQSOs
) can cause confusion, thanks to a tangle of tax, compliance, and investment issues.
Companies determine whether an employee's exercise of an NQSO
creates an excess tax benefit or deficiency on a grant-by-grant basis by looking at the compensation expense and related deferred tax asset they recorded for each specific grant to see the amount of deferred tax asset "relieved" from the balance sheet.
83 as follows: if, for example, shares are acquired through the exercise of an NQSO
in a transfer taxable under Sec.