Maren received 10 nqos (each option gives her the right to purchase 7 shares of stock for $8 per share) at the time she started working

Question

Maren received 10 non-qualified stock options (NQSOs), with each option granting her the right to purchase 7 shares of stock at $8 per share, when she started working, at which time the stock price was $6 per share. When the stock price rose to $18 per share, she exercised all of her options. Eighteen months later, she sold all of the shares for $23 per share. How much gain will Maren recognize on the sale of the shares, and how much tax will she owe, assuming her marginal tax rate is 37%?

Anonymous · Accepted Answer

Answer and Explanation:The computation of the gain recognized and the tax that should be paid is shown belowSale of share(10 × 8 × $22) $1,760Less: basis (10 × 8 ×$15) $1,200 The gain realized $560Now the tax would be = $560 × 15% preferential rate = $84

Anonymous · Answer

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Anonymous · Answer

Option (b) is correct.Explanation:Sale of share = NQOs received × No. of shares × Selling price per share                       = 10 × 8 × $22                       = $1,760Gain realised: = Sale of share - Basis= $1,760 - [NQOs received × No. of shares × Selling price per share at $15]= $1,760 - [10 × 8 × $15]= $1,760 - $1,200= $560Tax paid = Gain realised × preferential rate                = $560 × 15%                = $84

Ken Harvey III

Maren received 10 nqos (each option gives her the right to purchase 7 shares of stock for $8 per share) at the time she started working

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