Nonqualified or Nonstatutory Stock Options

Enter on Line 7 of Form the amount from Box 1 of your W Options granted under an employee stock purchase plan or an incentive stock option ISO plan are statutory stock options. These are statutory benefits because a law, or statute, requires employers to comply. Copyright This website is made available by the lawyer or law firm publisher for educational purposes only as well as to give general information and a general understanding of the law, not to provide specific legal advice. Since then he's researched and written newspaper and magazine stories on city government, court cases, business, real estate and finance, the uses of new technologies and film history.

Jan 31,  · Nonstatutory Stock Options. If your employer grants you a nonstatutory stock option, the amount of income to include and the time to include it depends on whether the fair market value of the option can be readily determined.

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Employees or independent contractors receiving nonstatutory stock options are taxed upon receipt, if the option has a readily ascertainable fair market value FMV.

This rule usually applies to publicly traded stock. In almost all other situations, however, the employee is taxed when the option is exercised. In either case, the income is the FMV of the stock minus the strike price. In contrast, employees who receive a statutory stock option are not taxed until they sell the stock. Most companies require that employees work for a requisite period or meet certain performance goals before they are eligible for stock options.

Once those requirements are satisfied, the options become "vested," regardless of whether or not he chooses to exercise any options. If, however, Joe exercised his options, then immediately sold the stock, he'd be subject to ordinary income treatment and could be taxed as high as Ascertain whether your stock option plan is nonstatutory read your stock-option plan ; if it is, consider exercising the option the when you must take the gain as income.

This decision depends on the cost of exercising the option and whether or not you anticipate selling your stock once you qualify for long-term capital gains. The information contained at this site is for educational purposes only and is not intended for any particular person or circumstance. A competent tax professional should always be consulted before utilizing any of the information contained at this site.

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What Is a Statutory Provision?

If a company grants you stock options outside a stock-purchase or incentive plan, it's a nonstatutory option. The tax-reporting requirements depend on whether you can determine the value of the option. There are no special income rules for the sale of stock acquired through the exercise of a nonstatutory stock option. Report the sale as explained in the Instructions for Schedule D (Form ), Capital Gains and Losses, for the year of the sale. I had a nonstatutory stock option sale reported in box 12 as a V in my w2 do I need to do anything else when inputting data into turbotax or will import my w2 be enough.