Fact pattern 4. The employee is a resident of the United States in the year of exercise…

resident of Japan in the year of sale. The period between grant and exercise is five years; the employee is a resident of, and performs services in, Japan for four of those years and the United States for one of those years.

There are four alternativesunder each fact pattem, resulting in 16 possible general cases. In the first alternative, the stock option is regarded as nonqualified under the tax laws of both the United States and Japan. In the second alternative,the stock option is regarded as