Which of the following is CORRECT?

Employees pay to exercise stock appreciation rights $($SARs$).$

When phantom stock awards are distributed in shares, rather than cash, the

employee recognizes long$-$term capital gain income.

The employer receives a tax deduction related to phantom stock in the same

year that the employee recognizes income.

For tax purposes, employers deduct compensation expense related to stock

appreciation rights in the year those awards are granted to employees.