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Qualifying Disposition

What is 'Qualifying Disposition'

A sale, transfer or exchange of stock obtained through a qualified stock option incentive plan, namely incentive stock option (ISO) plans and employee stock purchase plans (ESPP), that qualifies for favorable tax treatment for the employee selling the stock. In order to be a qualifying disposition, the employee must sell at least one year after receiving the stock, and two years after receiving the incentive stock option (ISO), or the beginning of the ESPP offering period.

The capital gains treatment for a qualifying disposition only applies to the amount of the sale represented by the difference between the exercise price of the option's stock and the market price at which the stock was sold.

Explaining 'Qualifying Disposition'

Non-statutory stock options (NSOs) do not qualify for capital gains tax treatment, and are always taxed at ordinary income rates. Some companies do not offer ISOs because, in contrast to non-statutory (or non-qualified) option plans, there is no tax deduction for the company when the options are exercised.


Further Reading


Disqualifying dispositions of incentive stock options: Tax benefits versus financial reporting costs
www.jstor.org [PDF]
… occurred between 1979 and 1981, with the introduction of ISOs in the Economic Recovery Tax … conversions: 2 were on the ECR list, 1 was a dis- qualifying disposition, 1 was … low frequency of conversion, we focus our discussion and empir- ical tests on disqualifying dispositions …

Stakeholders model of governance in Islamic economic systemStakeholders model of governance in Islamic economic system
papers.ssrn.com [PDF]
… occurred between 1979 and 1981, with the introduction of ISOs in the Economic Recovery Tax … conversions: 2 were on the ECR list, 1 was a dis- qualifying disposition, 1 was … low frequency of conversion, we focus our discussion and empir- ical tests on disqualifying dispositions …

Selling losers and keeping winners: How (savings) goal dynamics predict a reversal of the disposition effectSelling losers and keeping winners: How (savings) goal dynamics predict a reversal of the disposition effect
link.springer.com [PDF]
… occurred between 1979 and 1981, with the introduction of ISOs in the Economic Recovery Tax … conversions: 2 were on the ECR list, 1 was a dis- qualifying disposition, 1 was … low frequency of conversion, we focus our discussion and empir- ical tests on disqualifying dispositions …

Sunny Dispositions: Modernizing Investment Tax Credit Recapture Rules for Solar Energy Project Finance after the American Recovery and Reinvestment ActSunny Dispositions: Modernizing Investment Tax Credit Recapture Rules for Solar Energy Project Finance after the American Recovery and Reinvestment Act
heinonline.org [PDF]
… occurred between 1979 and 1981, with the introduction of ISOs in the Economic Recovery Tax … conversions: 2 were on the ECR list, 1 was a dis- qualifying disposition, 1 was … low frequency of conversion, we focus our discussion and empir- ical tests on disqualifying dispositions …

Fear and greed in financial markets: A clinical study of day-tradersFear and greed in financial markets: A clinical study of day-traders
pubs.aeaweb.org [PDF]
… occurred between 1979 and 1981, with the introduction of ISOs in the Economic Recovery Tax … conversions: 2 were on the ECR list, 1 was a dis- qualifying disposition, 1 was … low frequency of conversion, we focus our discussion and empir- ical tests on disqualifying dispositions …

Financial Options in the Real World: An Economic and Tax AnalysisFinancial Options in the Real World: An Economic and Tax Analysis
heinonline.org [PDF]
… occurred between 1979 and 1981, with the introduction of ISOs in the Economic Recovery Tax … conversions: 2 were on the ECR list, 1 was a dis- qualifying disposition, 1 was … low frequency of conversion, we focus our discussion and empir- ical tests on disqualifying dispositions …

The Judicial Role in Derivative Taxation: The Queen v. Shell Canada Limited and Financial Contract EconomicsThe Judicial Role in Derivative Taxation: The Queen v. Shell Canada Limited and Financial Contract Economics
heinonline.org [PDF]
… occurred between 1979 and 1981, with the introduction of ISOs in the Economic Recovery Tax … conversions: 2 were on the ECR list, 1 was a dis- qualifying disposition, 1 was … low frequency of conversion, we focus our discussion and empir- ical tests on disqualifying dispositions …

Disposition effect and herding behavior in the cryptocurrency marketDisposition effect and herding behavior in the cryptocurrency market
link.springer.com [PDF]
… occurred between 1979 and 1981, with the introduction of ISOs in the Economic Recovery Tax … conversions: 2 were on the ECR list, 1 was a dis- qualifying disposition, 1 was … low frequency of conversion, we focus our discussion and empir- ical tests on disqualifying dispositions …

Prudence or discrimination? Emergency measures, the global financial crisis and international economic lawPrudence or discrimination? Emergency measures, the global financial crisis and international economic law
academic.oup.com [PDF]
… occurred between 1979 and 1981, with the introduction of ISOs in the Economic Recovery Tax … conversions: 2 were on the ECR list, 1 was a dis- qualifying disposition, 1 was … low frequency of conversion, we focus our discussion and empir- ical tests on disqualifying dispositions …


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