The Kentucky Incentive Stock Option Plan (BISHOP) is a program offered by Bankers Note, Inc. to provide employees with additional benefits and incentives. This plan is designed to reward and retain top-performing employees by granting them the opportunity to purchase company stock at a predetermined price, usually below the market value. The Kentucky Incentive Stock Option Plan offers various types of stock options to cater to different employee needs and circumstances. These options may include: 1. Non-Qualified Stock Options (Nests): These options are typically available to all employees and do not have certain tax advantages associated with qualified stock options. Employees can purchase company stock at a predetermined price, known as the exercise price, and potentially benefit from future stock appreciation. 2. Incentive Stock Options (SOS): These options are generally offered to key employees and provide certain tax advantages. If specific criteria are met, such as holding the stock for a specific period, employees may be able to benefit from long-term capital gains tax rates upon selling the stock. 3. Restricted Stock Units (RSS): Instead of granting stock options, the bank may also offer RSS to employees. RSS represents the right to receive company stock at a future date based on certain conditions, such as the employee's continued service with the company. Upon meeting these conditions, the RSS convert into shares of company stock. 4. Employee Stock Purchase Plans (ESPN): While not specifically an incentive stock option, ESPN is another avenue for employees to acquire company stock. This plan allows employees to contribute a portion of their salary towards purchasing company stock at a discounted price. The ESPN typically offers a predetermined purchase period during which employees can participate. Bankers Note, Inc.'s Kentucky Incentive Stock Option Plan aims to motivate employees, align their interests with company performance, encourage loyalty, and provide long-term financial benefits. The specific terms and conditions of the plan may vary and will be outlined in the plan documents provided to eligible employees.
Kentucky Incentive Stock Option Plan of the Bankers Note, Inc.
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FAQ
With incentive stock options (ISOs), the value of the exercise income appears on Form W-2 only if you made what is technically called a disqualifying disposition. That means you sold or gifted the stock before you met the required holding periods of one year from exercise and two years from grant.
What is Form 3921? Form 3921 is an IRS form that must be filed by a company when an employee has exercised an incentive stock option (ISO) in the last tax year. Form 3921 informs the IRS which shareholders received ISO compensation. You must file one form per ISO exercise.
For nonstatutory options without a readily determinable fair market value, there's no taxable event when the option is granted but you must include in income the fair market value of the stock received on exercise, less the amount paid, when you exercise the option.
They provide employees the right, but not the obligation, to purchase shares of their employer's stock at a certain price for a certain period of time. Options are usually granted at the current market price of the stock and last for up to 10 years.
There are many requirements on using ISOs. First, the employee must not sell the stock until after two years from the date of receiving the options, and they must hold the stock for at least a year after exercising the option like other capital gains. Secondly, the stock option must last ten years.
Here's an example: You can purchase 1,000 shares of company stock at $20 a share with your vested ISO. Shares are trading for $40 in the market. If you already own 500 company shares, you can swap those shares (500 shares x $40 market price = $20,000) for the 1,000 new shares, rather than paying $20,000 in cash.
You report the taxable income only when you sell the stock. And, depending on how long you own the stock, that income could be taxed at capital gain rates ranging from 0% to 23.8% (for sales in 2023)?typically a lot lower than your regular income tax rate.
Taxes and Incentive Stock Options Although no tax is withheld when you exercise an ISO, tax may be due later when you sell the stock, as illustrated by the examples in this article. Be sure to plan for the tax consequences when you consider the consequences of selling the stock.