Nonqualified Stock Options Quiz

Nonqualified Stock Options Quiz

Test your knowledge of nonqualified stock options (NQSOs).

Please answer the following 10 questions. This quiz is also a course of study. The answer key links to content on the topic for follow-up reading. For in-depth courses of study that offer CE credits, see the myStockOptions Learning Center.

1. What is a nonqualified stock option (NQSO)?

2. What is the legal limit of the NQSO grant term?

3. When are NQSOs taxed?

4. Why might a grant of NQSOs be better than a grant of restricted stock or RSUs?

5. With a rising stock price, why do financial planners sometimes recommend waiting to exercise NQSOs until near the end of the option term?

6. When you exercise NQSOs, the spread is taxed as what type of income?

7. How long must you hold NQSO shares to have the gains taxed as long-term capital gains?

8. Is the income from an employee’s NQSO exercise reported on Form W-2?

9. Which two IRS forms are used for reporting capital gains on your tax return after you have sold NQSO shares?

10. For a sell-to-cover NQSO exercise, how do you report the stock sale on your tax return?

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