New deferral option
The grant of stock options (in technical terms are ones that are nonstatutory stock options and not incentive stock options) usually are not taxed until the exercise of the options, and restricted stock units (RSUs) usually are not taxed until the stock becomes vested.
Corporation’s perspective
While employees make the deferral election, it’s up to their corporations to make this possible by creating qualified equity grants and doing other things. Corporations must tell employees about the Sec. 83(i) election if they are eligible for it.
Corporations can bar employees from opting to defer income for 5 years in 2 ways:
- Not provide an escrow arrangement.
- Not meet qualified equity grant conditions (e.g., only issue grants to 50% of employees rather than the 80% requirement).
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