Taxation of Employee Stock and Stock Options
Author: Jennifer Kowal
| CPE Credit: |
2 hours for CPAs
2 hours Federal Tax Related for EAs and OTRPs
2 hours Federal Tax Law for CTEC |
Per the IRS Education Provider Standards this course must be COMPLETED by 12/31/2025 to receive credits. NOTE: Go to My Professional Profile in your CCH CPELink account settings to ensure your name, and PTIN number; matches your PTIN card
Using equity to compensate employees in the form of restricted stock, stock options, and synthetic stock arrangements is on the rise in recent years. These compensation tools are a common way to align the interests of employees and shareholders.
This course explains the different types of equity compensation arrangements and addresses their taxation to employees and deductibility to employers. It also covers the potential application of rules denying compensation deductions or applying penalty taxes. Finally, it covers factors to consider in efficient tax planning for equity compensation arrangements.
Publication Date: September 2022
Designed For
Tax practitioners at all levels who advise on the taxation of equity compensation.
Topics Covered
- Taxation of employee stock options
- Taxation of restricted stock
- Section 83 and Section 83(b) elections
- Section 409A's penalty provisions affecting stock options
Learning Objectives
- Identify and distinguish between different types of equity compensation
- Explain the tax treatment of various types of employee restricted stock, stock options and other equity arrangements
- Recognize the application of relevant I.R.C. sections, including section 83 and section 409A
- Identify what percent of large CEO pay is represented by base salary based on the referenced HBR study
- Identify the price at which the option holder may purchase a share of stock using the option
- Identify which section does not consider an option to be "property," so the employee is not taxed until the option is exercised
- Identify the type of stock that is sometimes called a "west coast option"
- Identify the year in which Section 409A was enacted to address perceived abuses by senior executives of deferred compensation programs
Level
Intermediate
Instructional Method
Self-Study
NASBA Field of Study
Taxes (2 hours)
Program Prerequisites
Basic understanding of taxation of equity compensation.
Advance Preparation
None
