Big Lots 2013 Annual Report Download - page 36

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Non-Qualified Stock Options
A NQSO results in no taxable income to the participant or deduction to us at the time it is granted. A participant
exercising a NQSO will, at that time, realize taxable compensation in the amount of the difference between the
stock option exercise price and the then-current fair market value of the common shares. Subject to the applicable
provisions of the IRC, a deduction for federal income tax purposes will be allowable to us in the year of exercise in
an amount equal to the taxable compensation recognized by the participant.
The participant’s basis in such common shares is equal to the sum of the stock option exercise price plus the
amount includible in his or her income as compensation upon exercise. Any gain (or loss) upon subsequent
disposition of the common shares will be a long-term or short-term gain (or loss), depending upon the holding
period of the common shares.
If a participant tenders previously owned common shares in payment of the NQSO exercise price, then, instead
of the treatment described above, the following generally will apply: (1) a number of new common shares equal
to the number of previously owned common shares tendered will be considered to have been received in a tax-
free exchange; (2) the participant’s basis and holding period for such number of new common shares will be equal
to the basis and holding period of the previously owned common shares exchanged; (3) the participant will have
compensation income equal to the fair market value on the exercise date of the number of new common shares
received in excess of such number of exchanged common shares; (4) the participant’s basis in such excess shares
will be equal to the amount of such compensation income; and (5) the holding period in such common shares will
begin on the exercise date.
Stock Appreciation Rights
Generally, a participant that receives a SAR will not recognize taxable income at the time the SAR is granted. If
a participant receives the appreciation inherent in a SAR in cash, the cash will be taxed as ordinary compensation
income to the participant at the time it is received. If a participant receives the appreciation inherent in a SAR in
common shares, the spread between the then-current fair market value of the common shares and the grant price
will be taxed as ordinary compensation income to the participant at the time it is received. In general, there will
be no federal income tax deduction allowed to us upon the grant or termination of a SAR. However, upon the
settlement of either form of SAR, we will generally be entitled to a deduction equal to the amount of ordinary
income the participant is required to recognize as a result of the settlement.
If the amount a participant receives upon disposition of the common shares that the participant acquired by
exercising a SAR is greater than the sum of the aggregate exercise price that the participant paid plus the amount of
ordinary income recognized by the participant upon exercise, the excess will be treated as a long-term or short-
term capital gain, depending on the holding period of the common shares. Conversely, if the amount a participant
receives upon disposition of the common shares that the participant acquired by exercising a SAR is less than the
sum of the aggregate exercise price that the participant paid plus the amount of ordinary income recognized by the
participant upon exercise, the difference will be treated as a long-term or short-term capital loss, depending on the
holding period of the common shares.
Restricted Stock
Generally, a participant will not recognize income and we will not be entitled to a deduction at the time an award
of restricted stock is made under the 2012 LTIP, unless the participant makes a Section 83(b) election described
below. A participant who has not made such an election will recognize ordinary compensation income at the time
the restrictions on the common shares lapse in an amount equal to the fair market value of the common shares at
such time. We will generally be entitled to a corresponding deduction in the same amount and at the same time
as the participant recognizes income. Any otherwise taxable disposition of the restricted stock after the time the
restrictions lapse will result in a capital gain or loss to the extent the amount realized from the sale differs from the
tax basis (i.e., the fair market value of the common shares on the date the restrictions lapse).