If the stock is received for services, and if income is not immediately recognized, the deferred income, plus any future appreciation in the stock will be taxed as ordinary income. If, however, the individual recognizes income immediately upon receiving the stock, and holds the stock for more than a year, the income recognized immediately will be ordinary income, but future appreciation will be taxed at low capital gain rates. If he employs a strategy to defer recognition of income his tax is much higher. Using this strategy he pays no immediate tax on receipt of the stock. The problem illustrated by Example 3 is a problem only for noncorporate taxpayers.
Corporations pay tax on capital gain at the same rate as tax on ordinary income.
So, a corporation does not give up possible preferential tax rates by employing a strategy to defer income. Deferring the tax Using nonqualified options . A nonqualified option is one that is not an Incentive Stock Option, or any other qualified option that carries with it special treatment under the tax code. The receipt of nonqualified options of a closely-held corporation, in exchange for services, is generally not taxable, so long as the options do not have a readily ascertainable fair market value. Jones has no immediate taxable income when he receives the options, and if the stock becomes worthless he loses only the economic value of the stock.