CompUSA 2009 Annual Report Download - page 43

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New Plan Benefits
Since no Awards have been made under the Plan and since Awards under the Plan are wholly discretionary, amounts payable
under the Plan are not determinable at this time.
Summary of Federal Tax Consequences
The following is a brief description of the federal income tax treatment that will generally apply to Awards under the Plan based on
current federal income tax rules.
Non-Qualified Options. The grant of an NQO will not result in taxable income to the grantee. Except as described below, the
grantee will realize ordinary income at the time of exercise in an amount equal to the excess of the fair market value of the Stock
acquired over the exercise price for those shares, and the Company will be entitled to a corresponding deduction. Gains or losses
realized by the grantee upon disposition of such shares will be treated as capital gains and losses, with the basis in such Stock equal to
the fair market value of the shares at the time of exercise.
Incentive Stock Options. The grant of an incentive stock option will not result in taxable income to the grantee. The exercise of an
incentive stock option will not result in taxable income to the grantee provided that the grantee was, without a break in service, an
employee of the Company or a subsidiary during the period beginning on the date of the grant of the option and ending on the date
three months prior to the date of exercise (one year prior to the date of exercise if the grantee is disabled, as that term is defined in the
Code). The excess of the fair market value of the Stock at the time of the exercise of an incentive stock option over the exercise price is
an adjustment that is included in the calculation of the grantee’ s alternative minimum taxable income for the tax year in which the
incentive stock option is exercised.
If the grantee does not sell or otherwise dispose of the Stock within two years from the date of the grant of the incentive stock
option or within one year after the transfer of such Stock to the grantee, then, upon disposition of such Stock, any amount realized in
excess of the exercise price will be taxed to the grantee as capital gain and the Company will not be entitled to a corresponding
deduction. A capital loss will be recognized to the extent that the amount realized is less than the exercise price. If the foregoing
holding period requirements are not met, the grantee will generally realize ordinary income at the time of the disposition of the shares,
in an amount equal to the lesser of (i) the excess of the fair market value of the Stock on the date of exercise over the exercise price, or
(ii) the excess, if any, of the amount realized upon disposition of the shares over the exercise price and the Company will be entitled to
a corresponding deduction. If the amount realized exceeds the value of the shares on the date of exercise, any additional amount will
be capital gain. If the amount realized is less than the exercise price, the grantee will recognize no income, and a capital loss will be
recognized equal to the excess of the exercise price over the amount realized upon the disposition of the shares. The Company will be
entitled to a deduction to the extent that the grantee recognizes ordinary income because of a disqualifying disposition.
Stock Appreciation Rights. The grant of a SAR will not result in taxable income to the grantee. Upon exercise of a SAR, the fair
market value of Stock received will be taxable to the grantee as ordinary income and the Company will be entitled to a corresponding
deduction. Gains and losses realized by the grantee upon disposition of any such shares will be treated as capital gains and losses, with
the basis in such shares equal to the fair market value of the shares at the time of exercise.
Restricted Stock. The grant of restricted stock will not result in taxable income at the time of grant and the Company will not be
entitled to a corresponding deduction, assuming that the restrictions constitute a “substantial risk of forfeiture” for federal income tax
purposes. Upon the vesting of shares of restricted stock, the holder will realize ordinary income in an amount equal to the then fair
market value of those shares, and the Company will be entitled to a corresponding deduction. Gains or losses realized by the grantee
upon disposition of such shares will be treated as capital gains and losses, with the basis in such shares equal to the fair market value of
the shares at the time of vesting. Dividends paid to the holder during the restriction period, if so provided, will also be compensation
income to the grantee and the Company will be entitled to a corresponding deduction. A grantee may elect pursuant to Section 83(b) of
the Code to have income recognized at the date of grant of a restricted stock award and to have the applicable capital gain holding
period commence as of that date, and the Company will be entitled to a corresponding deduction.
Restricted Stock Units. The grant of a restricted stock unit will not result in taxable income at the time of grant and the Company
will not be entitled to a corresponding deduction. Upon the vesting of the restricted stock unit, the holder will realize ordinary income
in an amount equal to the then fair market value of the shares received, and the Company will be entitled to a corresponding deduction.