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Employee stock option - Encyclopedia.WorldSearch (Site not responding. Last check: 2007-10-22) |
 | | Employee stock options are stock options for the company's own stock that are often offered to upper-level employees as part of the executive compensation package, especially by American corporations. |
 | | Because most employee stock options are nontransferrable, are not immediately exerciseable, and have other restrictions, the IRS considers that their "fair market value" cannot be "readily determined", and therefore "no taxable event" occurs when an employee receives an option grant. |
 | | If, however, the employee exercises the options, then holds onto the resulting stock for at least one year before selling, then when the sale occurs, the profit is taxed at the lower capital gains tax rate, which is either 5%, 15%, 25%, or 28% (in 2004). |
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