corporations have found that one way to increase employee motivation is to grant options to purchase stock in thecompany. incentive (qualified) options differ from nonqualified options in all of the following respects except isos may only be granted to employees while nsos may be given to virtuallyanyone. there is a maximum 10-year limit for exercising an iso; no such time limit existsfor an nso. the holder of an iso can recognize capital gain (loss) as a result ofexercise, whereas ordinary income (loss) is the result with an nso. the recipient of the grant of the iso has no income tax consequences at the timeof the grant.