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    between the option price and the amount received. However, if the option price was less than the fair market value at the time
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    Statutory Stock Option Plans.

    Generally, property transferred to an employee in connection with services performed by the employee, results in ordinary income to the employee and a deduction to the employer. The Code does provide for special tax treatment for statutory stock options. The transfer of a statutory stock option to an employee has no tax consequence until the employee sells the stock. At that time, the employee pays capital gains tax (generally 15%) on the difference between the option price and the amount received. However, if the option price was less than the fair market value at the time

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    performed by the employee, results in ordinary income to the employee and a deduction to the employer. The Code does provide for special tax treatment for statutory stock options. The transfer of a statutory stock option to an employee has no tax consequence until the employee sells the stock. At that time, the employee pays capital gains tax (generally 15%) on the difference between the option price and the amount received. However, if the option price was less than the fair market value at the time
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    or special tax treatment for statutory stock options. The transfer of a statutory stock option to an employee has no tax consequence until the employee sells the stock. At that time, the employee pays capital gains tax (generally 15%) on the difference between the option price and the amount received. However, if the option price was less than the fair market value at the time
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    quence until the employee sells the stock. At that time, the employee pays capital gains tax (generally 15%) on the difference between the option price and the amount received. However, if the option price was less than the fair market value at the time
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    between the option price and the amount received. However, if the option price was less than the fair market value at the time the option was granted, the employee must recognize ordinary income (taxed up to 35%) on the difference between the option price and the fair market value at the time the option was granted.

    As this is extremely confusing, an example is appropriate:

    In year one, Employer (GM) gives Employee a five year statutory stock option to purchase one share of GM for $100. At the time, shares of GM have a fair market value of $100. In year 3, when shares of GM have a fair market value of $150, Employee

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