Non-Qualified Stock Options (NQSOs) are a type of stock option that employees can receive. Unlike Incentive Stock Options (ISOs), NQSOs do not qualify for preferential tax treatment under the United States Internal Revenue Code. NQSOs are included as part of an employee's compensation package and provide the opportunity to purchase company shares at a predetermined price, known as the exercise price. When exercising NQSOs, employees typically incur ordinary income tax obligations, both at the time of exercise and when selling the acquired stock.

Upon exercising NQSOs, employees are required to pay ordinary income tax on the spread between the exercise price and the fair market value of the stock. When selling the NQSO-acquired stock, the resulting gains may be subject to either ordinary income tax or capital gains tax, depending on various factors.

Please note that the provided summary offers a simplified explanation of non-qualified stock options (NQSOs) and their tax implications. For accurate and comprehensive information tailored to your specific situation, it is advised to seek advice from a qualified tax professional or legal expert.