Question

MED CORPORATE OPERATIONS #10

When a stock is selling for $ 14 per share, a corporation grants an employee a non-qualified stock option to purchase the shares for $ 8 per share. When the fair market value of the stock is $ 24 per share, the employee exercises the option. In the year of the exercise, how much may the corporation deduct?

Answer 1

At the time the stock options are cashed out, U.S. employees will have the following taxes withheld:

Federal taxes – 25% (up to $1 million supplemental income – 35% above $1 million supplemental income)

State taxes – varies by state

Georgia = 6%

Texas = 0%

Tennessee = 0%

California = 10.23%

Colorado = 4.63%

Oregon = 9%

Virginia = 5.75%

New York = 9.77%

Ohio = 3.5%

Thus company may deduct 25% of the stock option benifit received by the employee.

Source of the information: https://www.sec.gov/Archives/edgar/data/845818/000119312511206591/dex99a37.htm