Chapter 12 Compensation

Cash, Equity and nontaxable employee benefits are

compensations

The three compensations are

cash, equity and nontaxable employee benefits

T/F: Cash compensation is included in gross income

true

What are the major types of equity-based compensations?

nonqualified stock options, incentive stock options, restricted stock units, restricted stock awards

The day that the employee is allocated stock options is called the

grant date

Vesting date is described as

time the stock options granted can be exercised

The exercise/strike price is the

amount paid to acquire shares with stock options

The bargain element is the

fair market value of stock minus exercise price on exercise date

For Incentive Stock options they must be held ___ years after the ____ date and 1 year after the ____ date to defer tax consequences

2, grant, exercise

If an incentive stock is sold before the 2 year, and 1 year requirement then it is treated as

ordinary income, similar to nonqualified options