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Activity 12

Student’s Name

Professor’s Name

Institutional Affiliations

Course

Due Date
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Activity 12

The use of equity compensation programs, such as stock options and employee stock

purchase plans, can help companies build a more secure financial future for themselves and

their employees. Benefits may be used to help pay for future educational expenses, retirement

expenses, or even the purchase of a vacation home, provided that the benefits are not abused

in any way during their application and use. An agreed-upon number of shares of your

employer's common stock will be exchanged for the right to purchase those shares at a

predetermined price (referred to as the "exercise" or "strike" price) within a specified period

as part of the agreement; however, the agreement does not specify how many shares will be

exchanged (also known as the vesting period) (Gray & Suri, 2019). When you decide to

acquire shares, your vesting period generally begins when you decide to do so and ends on

the day you decide to exercise your stock options.

Your stock options will expire after that, and you will have a ten-year window in

which to exercise them. When it comes to employee-sponsored discounts and stock option

profits, alternative minimum taxes (ATM’s) may be applicable in certain circumstances. The

reason for this is that, until you exercise your stock option rights, you will not be subject to

regular income tax on your earnings (AMT). A capital gain tax will be levied against you if

you sell stock in a company at a higher price than the strike price you specified when you

purchased the stock. To qualify for long-term capital gains treatment, your shares must have

been held for at least one year following the execution of an option and for at least two years

following the date of the option's issuance after the option was executed. You will only be

eligible for long-term capital gains treatment on your investment if you hold on to your

shares for at least one year after the exercise date and at least two years after the option

issuance date (Huang et al., 2019). Providing that a sufficient number of executive stock

option awards are postponed from March 15 to July 30, the transaction may be completed
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without the company incurring any tax liabilities during the interim period. In light of your

decision to defer compensation until the following fiscal year, you now have an excellent

opportunity to keep your employees engaged and committed to the company's success for an

extended period.
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References

Gray, M. L., & Suri, S. (2019). Ghost work: How to stop Silicon Valley from building a new

global underclass. Eamon Dolan Books. https://books.google.com/books?

hl=en&lr=&id=8AmXDwAAQBAJ&oi=fnd&pg=PP1&dq=+Assume+you+work+in+

the+accounting+department+of+a+large+software+company&ots=WUJ5NY0Q2n&s

ig=YT4TSjxaSiMRAjEhzmot9QP8Y_I

Huang, R., Spector, J. M., & Yang, J. (2019). Educational technology: a primer for the 21st

century. Springer. https://books.google.com/books?

hl=en&lr=&id=7sCKDwAAQBAJ&oi=fnd&pg=PR5&dq=+Assume+you+work+in+t

he+accounting+department+of+a+large+software+company&ots=hC7Lz7FY9w&sig

=fuTl0LfiwXgLN63TDomfGx_6wlQ