Employer Stock Plans
Chapters in this video
- 0:00 The spread is the key to every tax rule
- 1:24 NQSOs: ordinary income and the employer deduction trap
- 2:40 ISOs: no regular income tax at exercise, but watch for AMT
- 3:57 The two-year, one-year holding period lock
- 5:01 Side-by-side ISO versus NQSO comparison table
- 5:42 ESPPs: 15% discount, lookback provision, and tax deferral
- 7:12 Rapid-fire exam recap
What this video covers
- Why NQSOs trigger ordinary income tax on the spread at exercise, and why the employer gets a matching tax deduction at that exact moment
- How ISOs defer regular income tax at exercise, and why the spread is still an alternative minimum tax (AMT) preference item
- The ISO holding period lock: two years from grant date and one year from exercise date, and what happens with a disqualifying disposition
- Why ESPP discounts (up to 15% below fair market value) are deferred to disposition rather than taxed at purchase
- How the lookback provision works in ESPPs, applying the discount to the lower of beginning or ending period stock price
- When an employer receives a tax deduction for ISOs (only on a disqualifying disposition) versus NQSOs (always at exercise)
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