A nonqualified stock option will create a permanent book-tax difference in a given year if it accrues during the year but is exercised in a later year.

Name: A nonqualified stock option will create a permanent book-tax difference in a given year if it accrues during the year but is exercised in a later year.
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A nonqualified stock option creates a temporary book-tax difference because the tax deduction is deferred until the option is exercised, aligning the tax and book treatment in future periods.

A Nonqualified Stock Option Will Create a Permanent Book-Tax Difference