Backdating and spring loading

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The company waits until the stock drops, then issues the options at a low point in the stock's price.

This practice is called "bullet-dodging." To illustrate the effect of backdating options, consider Mike who is offered a job as CEO of Acme Corporation, a public company, on September 1st, when Acme's stock is worth /share.

In some cases, the date of exercise, rather than the date of grant, was changed to an earlier date to convert ordinary income into capital gains.

In general, companies engaging in a classic backdating transaction chose a date when the stock price was at a low point and chose that favorable date as the grant date.

As part of his compensation, Mike is offered a salary of

The company waits until the stock drops, then issues the options at a low point in the stock's price.This practice is called "bullet-dodging." To illustrate the effect of backdating options, consider Mike who is offered a job as CEO of Acme Corporation, a public company, on September 1st, when Acme's stock is worth $20/share.In some cases, the date of exercise, rather than the date of grant, was changed to an earlier date to convert ordinary income into capital gains.In general, companies engaging in a classic backdating transaction chose a date when the stock price was at a low point and chose that favorable date as the grant date.

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The company waits until the stock drops, then issues the options at a low point in the stock's price.

This practice is called "bullet-dodging." To illustrate the effect of backdating options, consider Mike who is offered a job as CEO of Acme Corporation, a public company, on September 1st, when Acme's stock is worth $20/share.

In some cases, the date of exercise, rather than the date of grant, was changed to an earlier date to convert ordinary income into capital gains.

In general, companies engaging in a classic backdating transaction chose a date when the stock price was at a low point and chose that favorable date as the grant date.

As part of his compensation, Mike is offered a salary of $1,000,000 and 1,000,000 stock options that will vest immediately.

The board of directors approves the compensation package on November 1st, when Acme's stock is worth $30/share.

IRS intends the program to minimize compliance burdens on employees who are not corporate insiders while collecting the additional taxes due.

Under the IRS initiative, employers will not report the additional taxes on the employee's W-2 and the employee will not be obligated to pay the additional taxes.

,000,000 and 1,000,000 stock options that will vest immediately.

The board of directors approves the compensation package on November 1st, when Acme's stock is worth /share.

IRS intends the program to minimize compliance burdens on employees who are not corporate insiders while collecting the additional taxes due.

Under the IRS initiative, employers will not report the additional taxes on the employee's W-2 and the employee will not be obligated to pay the additional taxes.

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In addition, by choosing an exercise date in which the stock had a low value, the executive converts potential ordinary income into capital gains.The stock option backdating scandal shows no signs of abating and the newly-discovered backdating of the date of exercise may give corporate American another black-eye.Expect IRS to aggressively pursue this cheating since it amounts to tax fraud and evasion, pure and simple, and is relatively easy to prove.The salary paid cannot exceed

In addition, by choosing an exercise date in which the stock had a low value, the executive converts potential ordinary income into capital gains.

The stock option backdating scandal shows no signs of abating and the newly-discovered backdating of the date of exercise may give corporate American another black-eye.

Expect IRS to aggressively pursue this cheating since it amounts to tax fraud and evasion, pure and simple, and is relatively easy to prove.

The salary paid cannot exceed $1,000,000, excluding performance-based compensation, such as stock options, provided the exercise price equals or exceeds the fair market value as of the date of grant. 162(m) has been violated since Mike received stock options at an exercise price of $20/share when Acme's stock was worth $30/share.

Therefore, Acme may not deduct Mike's compensation in excess of the $1,000,000 salary, which could cause a restatement of earnings of $10,000,000.

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In addition, by choosing an exercise date in which the stock had a low value, the executive converts potential ordinary income into capital gains.The stock option backdating scandal shows no signs of abating and the newly-discovered backdating of the date of exercise may give corporate American another black-eye.Expect IRS to aggressively pursue this cheating since it amounts to tax fraud and evasion, pure and simple, and is relatively easy to prove.The salary paid cannot exceed $1,000,000, excluding performance-based compensation, such as stock options, provided the exercise price equals or exceeds the fair market value as of the date of grant. 162(m) has been violated since Mike received stock options at an exercise price of $20/share when Acme's stock was worth $30/share.Therefore, Acme may not deduct Mike's compensation in excess of the $1,000,000 salary, which could cause a restatement of earnings of $10,000,000.

,000,000, excluding performance-based compensation, such as stock options, provided the exercise price equals or exceeds the fair market value as of the date of grant. 162(m) has been violated since Mike received stock options at an exercise price of /share when Acme's stock was worth /share.Therefore, Acme may not deduct Mike's compensation in excess of the

In addition, by choosing an exercise date in which the stock had a low value, the executive converts potential ordinary income into capital gains.

The stock option backdating scandal shows no signs of abating and the newly-discovered backdating of the date of exercise may give corporate American another black-eye.

Expect IRS to aggressively pursue this cheating since it amounts to tax fraud and evasion, pure and simple, and is relatively easy to prove.

The salary paid cannot exceed $1,000,000, excluding performance-based compensation, such as stock options, provided the exercise price equals or exceeds the fair market value as of the date of grant. 162(m) has been violated since Mike received stock options at an exercise price of $20/share when Acme's stock was worth $30/share.

Therefore, Acme may not deduct Mike's compensation in excess of the $1,000,000 salary, which could cause a restatement of earnings of $10,000,000.

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In addition, by choosing an exercise date in which the stock had a low value, the executive converts potential ordinary income into capital gains.The stock option backdating scandal shows no signs of abating and the newly-discovered backdating of the date of exercise may give corporate American another black-eye.Expect IRS to aggressively pursue this cheating since it amounts to tax fraud and evasion, pure and simple, and is relatively easy to prove.The salary paid cannot exceed $1,000,000, excluding performance-based compensation, such as stock options, provided the exercise price equals or exceeds the fair market value as of the date of grant. 162(m) has been violated since Mike received stock options at an exercise price of $20/share when Acme's stock was worth $30/share.Therefore, Acme may not deduct Mike's compensation in excess of the $1,000,000 salary, which could cause a restatement of earnings of $10,000,000.

,000,000 salary, which could cause a restatement of earnings of ,000,000.

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