Best Buy 2009 Annual Report Download - page 66

Subject to the provisions of the amended Omnibus Plan Awards Other Than Options and SARs. As to other
or an award agreement, the Compensation Committee awards granted under the Omnibus Plan that are
may not amend any outstanding award agreement payable either in cash or shares of our common stock
without the participant’s consent, if the action would that are either transferable or not subject to substantial
adversely affect the participant’s rights. risk of forfeiture, the holder of the award must recognize
ordinary income equal to (a) the amount of cash
What are the federal income tax consequences of received or, as applicable; (b) the excess of (i) the fair
awards under the amended Omnibus Plan? market value of the shares received (determined as of
Grant of Options and SARs. The grant of a stock the date of receipt) over (ii) the amount (if any) paid for
option or SAR is not expected to result in any taxable the shares by the holder of the award. We will generally
income for the recipient. be entitled at that time to an income tax deduction for
the same amount.
Exercise of Options and SARs. When the holder of a
non-qualified stock option exercises the option, the As to an award that is payable in shares of our
holder must recognize ordinary income equal to the common stock that are restricted from transfer and
excess of the fair market value of the shares of our subject to substantial risk of forfeiture unless a special
common stock acquired on the date of exercise over the election is made by the holder of the award under the
exercise price, and we will generally be entitled at that Code, the holder must recognize ordinary income equal
time to an income tax deduction for the same amount. to the excess of (i) the fair market value of the shares
The holder of an incentive stock option generally will received (determined as of the first time the shares
have no taxable income upon exercising the option become transferable or not subject to substantial risk of
(except that an alternative minimum tax liability may forfeiture, whichever occurs earlier) over (ii) the amount
arise), and we will not be entitled to an income tax (if any) paid for the shares by the holder of the award.
deduction. Upon exercising a SAR, the amount of any We will generally be entitled at that time to an income
cash received and the fair market value on the exercise tax deduction for the same amount.
date of any shares of our common stock received are Our Income Tax Deduction. Subject to the usual rules
taxable to the recipient as ordinary income and concerning reasonable compensation, and assuming
generally deductible by us. that, as expected, performance awards paid under the
Disposition of Shares Acquired Upon Exercise of Options amended Omnibus Plan are ‘‘qualified performance-
and SARs. The tax consequence upon a person’s based compensation’’ within the meaning of
disposition of shares of common stock acquired through Section 162(m) of the Code, we will generally be
the exercise of an option or SAR will depend on how entitled to a corresponding income tax deduction at the
long the shares have been held, and whether the shares time a participant recognizes ordinary income from
were acquired by exercising an incentive stock option or awards made under the amended Omnibus Plan.
by exercising a non-qualified stock option or SAR. However, we will not receive any income tax deduction
Generally, there will be no tax consequence to us in when a participant recognizes capital gain income upon
connection with a person’s disposition of shares of disposition of shares of common stock received pursuant
common stock acquired under an option or SAR, except to an incentive stock option or any other form of award.
that we may be entitled to an income tax deduction in Delivery of Shares for Tax Obligation. Under the
the case of the disposition of shares acquired under an amended Omnibus Plan, the Compensation Committee
incentive stock option before the applicable incentive may permit participants receiving or exercising awards,
stock option holding periods set forth in the Code have subject to the discretion of the Compensation
been satisfied. Committee and upon such terms and conditions as it
may impose, to deliver to us shares of common stock
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