This excerpt taken from the DLTR DEF 14A filed May 9, 2008.
Stock Appreciation Rights. The grant of a Stock Appreciation Right ("SAR") will not result in taxable income to the participant. Upon exercise of an SAR, the amount of cash or the fair market value of shares received will be taxable to the participant as ordinary income, and a corresponding deduction will be allowed to the company. Gains or losses realized by the participant upon disposition of such shares will be treated as capital gains and losses, with the basis in such shares equal to the fair market value of the shares at the time of exercise.