NQSO AND ISO COMPARISON
01.Core Concepts
33 ISO NQSO No Income Tax Consequence If Strike Price ≥ FMV No Income Tax Consequence At Grant Date No Ordinary Income AMT Adjustment = FMV – Strike Price Ordinary (W-2) Income* = FMV – Exercise Price At Exercise Date If stock was held for 2 years from date of grant and 1 year from date of exercise: Gain = LTCG If holding period not met, bargain element is treated as ordinary income (reported on W-2), remaining gain is capital Long-Term or Short-Term Capital Gain / Loss Depending on Holding Period Basis = FMV at Date of Exercise At Sale Date * This result can be changed if the taxpayer makes an election under IRC Section 83(b).