Since this is less than the 6,000 options that vest each year under this plan, the excess options (566 per year) are treated as NSOs, with the stock option benefit on these options subject to tax in the year of exercise. Consequently, in the year of exercise, the stock option benefit on 27,170 exercised options will be deferred until the year in which the shares are sold for regular income tax purposes, with the balance  subject to tax in the year of exercise.At exercise, the individual must report the full income benefit of 5,600 and pay tax amounting to ,124.Since the stock has not been sold at this time, the executive must pay this much larger tax liability from other income sources.
 Due to the significant AMT liability in the year of exercise, which is only partially creditable in the year of sale, the U. executive is in a substantially worse position than the Canadian executive. The 5,632.90 long-term capital gain in the year of sale is made up of 9,322  plus ,310.90. This amount is subject to tax at the rate of fifteen percent, for a tax liability of ,845.In Canada, as the options are exercised and sold in different years, we now have to consider the role of the deferral introduced in 2000, assuming that the options are exercised prior to March 4, 2010. The amount that may be deferred is limited to the benefit arising on 0,000 worth of stock options per year of vesting (based on the fair market value of the underlying stock when the options were granted).