Employees Receiving Nonqualified Stock Options Recognize Ordinary Income at the Grant

question 24

True/False

Employees receiving nonqualified stock options recognize ordinary income at the grant date or exercise date if there is a readily ascertainable fair market value.

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Definitions:

Dutch Auction

A Dutch auction is a market structure in which the price of something being sold is lowered until it meets a bid and is sold at that price.

Preemptive Right

A shareholder’s right to maintain their proportional ownership in a company by being able to buy additional shares before the company offers them to the public.

Proportional Ownership

Holding a portion of an entity that corresponds to the percentage of total shares owned.

Seasoned Equity Offering

The process by which companies with publicly traded shares issue additional equity to investors, usually to raise capital.