Chapter 12: Deferred Compensation & Equity Compensation

01.Core Concepts

If the employee does not hold the stock for the required holding period: • The employee will have W-2 income and capital gain (long or short) • W-2 Income = gain attributable to discount at date of purchase • Long or short-term capital gain = gain attributable to gain in excess of W-2 income  Holding period begins the day after the exercise date • Employer will have deduction equal to employee’s W-2 income.