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Definition of 'Qualifying Disposition'
A sale, transfer or exchange of stock obtained through a qualified stock option incentive plan, namely incentive stock option (ISO) plans and employee stock purchase plans (ESPP), that qualifies for favorable tax treatment for the employee selling the stock. In order to be a qualifying disposition, the employee must sell at least one year after receiving the stock, and two years after receiving the incentive stock option (ISO), or the beginning of the ESPP offering period.
The capital gains treatment for a qualifying disposition only applies to the amount of the sale represented by the difference between the exercise price of the option's stock and the market price at which the stock was sold.
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