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Your W-2 includes income from any other compensation sources you may have, such as stock options, restricted stock, restricted stock units, employee stock purchase plans, and cash bonuses.
As executives at a company receive yearly option grants, they begin to amass large amounts of stock and unexercised options. The value of those holdings appreciates greatly when the company's stock price rises and depreciates just as greatly when it falls.
The Employee Stock Option Plan (ESOP) is an employee benefit plan. It is issued by the company for its employees to encourage employee ownership in the company. The shares of the companies are given to the employees at discounted rates. Any company can issue ESOP.
Stock options are a form of compensation. Companies can grant them to employees, contractors, consultants and investors. These options, which are contracts, give an employee the right to buy, or exercise, a set number of shares of the company stock at a preset price, also known as the grant price.
Statutory Stock OptionsYou have taxable income or deductible loss when you sell the stock you bought by exercising the option. You generally treat this amount as a capital gain or loss. However, if you don't meet special holding period requirements, you'll have to treat income from the sale as ordinary income.
Stock Options and Equity Are Not Wages: In IBM v. Bajorek (1999) 191 F. 3d 1033, the Ninth Circuit Court of Appeals held that equity is not considered a wage because it has no monetary value.
An executive stock option is a contract that grants the right to buy a specified number of shares of the company's stock at a guaranteed "strike price" for a period of time, usually several years.
In a private company setting, after the founders have been issued fully vested or restricted stock under their stock purchase agreements, the employees, consultants, advisors and directors who are subsequently hired commonly receive equity compensation through stock options.
A stock option is a financial contract that basically allows someone the right but not the obligation to buy a certain number of company shares in the future, at today's market price. Thus, stock options allow CEOs to benefit if the company's stock price rises, but not lose out if the stock price falls.
ESOs are a form of equity compensation granted by companies to their employees and executives. Like a regular call option, an ESO gives the holder the right to purchase the underlying assetthe company's stockat a specified price for a finite period of time.