As a result of foreign ownership, it's common for U.S. employees to receive stock options from foreign parents that are subject to taxation in the United States.

To comply with the Internal Revenue Code, stock options granted to U.S. employees must be granted at fair market value, as of the date of grant. An option that is granted with an exercise price that is less than the FMV on the date of grant, known as a "discounted" stock option, is considered to be a form of nonqualified deferred compensation. When a discounted stock option vests, there are penalties under Section 409A of the Code, unless the discounted stock option formally complies with Section 409A.

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