CPM Executive Compensation & Equity Plans 2

Question 1

Under a qualified Employee Stock Purchase Plan (ESPP) that meets Section 423 requirements, the maximum discount that may be offered to employees is:

Accepted Answer

15%

Answer

10%

Answer

20%

Answer

25%

Question 2

When RSUs vest and shares are delivered to the employee, the employer is required to withhold:

Accepted Answer

Federal income tax, Social Security, and Medicare taxes

Answer

Only federal income tax at the flat supplemental rate

Answer

Only FICA taxes with no income tax withholding

Answer

Nothing, because equity awards are not subject to withholding

Question 3

The 'sell-to-cover' method for RSU tax withholding means that:

Accepted Answer

A portion of the vesting shares is automatically sold to generate proceeds equal to the required withholding taxes

Answer

The employee submits a personal check to the payroll department before shares are released

Answer

The company loans the employee money to pay the tax due

Answer

The employee elects to defer all tax liability to the following April

Question 4

For NQSO exercises paid as supplemental wages (separately from regular wages), the mandatory flat federal income tax withholding rate is:

Accepted Answer

22%

Answer

10%

Answer

15%

Answer

24%

Question 5

To receive preferential long-term capital gains treatment on ISO shares, an employee must satisfy which holding periods?

Accepted Answer

Hold at least 1 year from the exercise date AND at least 2 years from the original grant date

Answer

Hold at least 6 months from the exercise date

Answer

Hold at least 2 years from the exercise date only

Answer

Hold at least 1 year from the original grant date only

Question 6

A 'disqualifying disposition' of ISO shares occurs when:

Accepted Answer

ISO shares are sold before satisfying both the 1-year-from-exercise and 2-year-from-grant holding periods

Answer

The employee sells the shares at a loss

Answer

The employee forfeits the options upon termination before exercise

Answer

The exercise price is greater than the current market price at exercise

Question 7

IRS Form 3922 is used by employers to report:

Accepted Answer

Transfers of stock acquired through a Section 423 Employee Stock Purchase Plan (ESPP)

Answer

Incentive Stock Option (ISO) exercises

Answer

RSU vesting and share delivery events

Answer

Non-qualified stock option exercises