A Full Value Phantom Stock Plan is a deferred cash bonus program that creates a similar result as a restricted stock plan. The sponsoring company determines a phantom stock price through an internal or external valuation of the company. Employees are awarded some number of phantom shares that carry specific terms and conditions. At some point in time active employees will receive a cash payment equaling the value of the original shares plus the appreciation thereon. For example, assume an employee receives 100 phantom stock with a starting price of $10. At a pre-determined future date the company will calculate the value of the phantom stock price and pay the employee the full value. Assume, for our example, the share price grows to $18. The company will pay the employee $1,800. Phantom stock plans do not result in shareholder dilution because actual shares are not being transferred. Employees do not become owners. Instead, they are potential cash beneficiaries in the underlying company value. Phantom shares result in ordinary income taxation to the employees when they turn into an actual cash payment.