Assignment 5

Question 1

ISO

Answer 1

• Incentive Stock Options
• Available at employers discretion to only some employees, often only
HCE
• Term (duration) limited to 10 years
• Min. 2 year hold
• Option price must equal or exceed value of stock when granted

Question 2

Employee Stock Purchase Plan

Answer 2

• Option arrangements where full‐time
employees are allowed to buy stock in
employer’s corporation, often at a discount

Question 3

NQSO

Answer 3

• Nonqualified Stock Option

* More flexible than ISO

Question 4

Sec. 83(b) election

Answer 4

• Individual can elect within 30 days of a
transfer to include the fair market value of the
transferred property (stock) in his/her gross
income currently.

Question 5

Methods for exercising stock options

Answer 5

• Cashexercise
• Stock‐for‐stock exercise
• Cashless exercise
• Reload options