A Nonqualified Stock Option Is a Right to Buy a Share

question 18

True/False

A nonqualified stock option is a right to buy a share of stock at a fixed price within a specified time period. If the employee recognizes income when the stock option is received then the employer can take a deduction of the same amount.

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Definitions:

Federal Unemployment Tax

A federal levy paid by employers to fund the unemployment account of the federal government, used to pay unemployment benefits to workers who have lost jobs.

State Unemployment Tax

A tax imposed by state governments on employers to fund unemployment insurance benefits for workers who have lost their jobs.

Social Security Tax

Taxes collected to fund the Social Security program, providing benefits for retirees, the disabled, and survivors of deceased workers.

Medicare Tax

A federal tax that funds Medicare, a healthcare program for individuals over 65 and some younger people with disabilities; deducted from employee wages with a matching amount paid by employers.