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This excerpt taken from the ROST DEF 14A filed Apr 14, 2008. Nonstatutory Stock Options.
Options not designated or qualifying as
incentive stock options are nonstatutory stock options having no special tax
status. A participant generally recognizes no taxable income upon receipt of
such an option. Upon exercising a nonstatutory stock option, the participant
normally recognizes ordinary income equal to the difference between the exercise
price paid and the fair market value of the shares on the date when the option
is exercised. If the participant is an employee, such ordinary income generally
is subject to withholding of income and employment taxes. Upon the sale of stock
acquired by the exercise of a nonstatutory stock option, any gain or loss, based
on the difference between the sale price and the fair market value of the shares
on the exercise date, will be taxed as capital gain or loss. We generally should
be entitled to a tax deduction equal to the amount of ordinary income recognized
by the participant as a result of the exercise of a nonstatutory stock option,
except to the extent such deduction is limited by applicable provisions of the
Code.
Stock Appreciation Rights. A Participant recognizes no taxable income upon the receipt of a stock appreciation right. Upon the exercise of a stock appreciation right, the participant generally will recognize ordinary income in an amount equal to the excess of the fair market value of the underlying shares of common stock on the exercise date over the exercise price. If the participant is an employee, such ordinary income generally is subject to withholding of income and employment taxes. We generally should be entitled to a deduction equal to the amount of ordinary income recognized by the participant in connection with the exercise of the stock appreciation right, except to the extent such deduction is limited by applicable provisions of the Code. |
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