CEP Employee Stock Purchase Plans (ESPPs) 2

Question 1

For a Section 423 ESPP, what is the required holding period from the date of grant (offering date) to achieve a qualifying disposition?

Accepted Answer

2 years

Answer

6 months

Answer

1 year

Answer

3 years

Question 2

In addition to the holding period from the offering date, what is the required holding period from the purchase date for a qualifying disposition under Section 423?

Accepted Answer

1 year

Answer

6 months

Answer

18 months

Answer

2 years

Question 3

In a qualifying disposition of Section 423 ESPP shares purchased at a 15% discount with a look-back, how is the ordinary income component calculated?

Accepted Answer

The lesser of the actual gain on sale or the discount from FMV at the offering date

Answer

The entire difference between sale price and purchase price

Answer

15% of the FMV at the time of sale

Answer

The difference between FMV at purchase and the purchase price

Question 4

What happens to any gain above the ordinary income component in a qualifying disposition of ESPP shares?

Accepted Answer

It is treated as long-term capital gain

Answer

It is treated as short-term capital gain

Answer

It is subject to FICA taxes

Answer

It is deferred until the next tax year

Question 5

Which IRS form must an employer file to report the transfer of stock acquired through a Section 423 ESPP?

Accepted Answer

Form 3922

Answer

Form W-2

Answer

Form 1099-B

Answer

Form 3921

Question 6

In a disqualifying disposition of Section 423 ESPP shares, how is the ordinary income amount determined?

Accepted Answer

The FMV of the shares on the purchase date minus the amount paid

Answer

The full sale proceeds minus the purchase price paid

Answer

The discount from FMV at the offering date, capped at the actual gain

Answer

The FMV at the time of sale minus the FMV at the offering date

Question 7

When an employee sells ESPP shares in a disqualifying disposition at a price LOWER than the FMV on the purchase date, what is the ordinary income recognized?

Accepted Answer

The difference between the FMV at purchase and the purchase price, limited to the actual gain

Answer

The full 15% discount from the offering date FMV

Answer

Zero, because the shares were sold at a loss

Answer

The difference between the sale price and the purchase price paid