In this lesson, you will learn some of the basics about employee stock options and their tax consequences.
If all the tax talk in the preceding chapter hasn't thoroughly muddled your brain, let's move on to applying this newfound knowledge to your options.
I discussed in earlier chapters the tax consequences of exercising nonqualified stock options (NSOs). Here is a recap:
Employee stock options have no tax liability associated with them.
When you exercise nonqualified options, you must pay ordinary income tax on the difference between the grant price of the stock and the fair market value on the day you exercise.
You also incur a tax liability when you sell the stock. How long ...