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Though the glamour surrounding stock options and other share-based compensation dissipated with the bursting of the tech bubble at this millennium's outset, these employee incentives are still in place for many executives. Few of these executives, however, understand the special tax treatments associated with stock option and restricted stock grants. If the employee decides to hold on to the stock after exercise, future gains or losses are taxed at the more favorable capital gains rate. In the case of restricted stock grants, these grants are taxed as ordinary income when they vest.
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