The amount included as taxable compensation is the fair market

Typically, income is recognized at the time an employee exercises nonqualified options. The amount included as taxable compensation is the fair market value (FMV) of the stock on the exercise date, minus the amount paid (exercise price). Compensation is reported to an employee in box 1 of form W 2 and in box 12 with a code “v.” Income and employment taxes are withheld on this income.

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