Question

Maren received 10 NQOs (each option gives her the right to purchase 8 shares of stock for $8 per share) at the time she started working when the stock price was $6 per share. When the share price was $15 per share, she exercised all of her options. Eighteen months later she sold all of the shares for $22 per share. How much gain will Maren recognize on the sale of the shares and how much tax will she pay assuming her marginal tax rate is 37 percent?

Answer 1

Answer and Explanation:

The computation of the gain recognized and the tax that should be paid is shown below

Sale of share(10 × 8 × $22) $1,760

Less: basis (10 × 8 ×$15) $1,200

The gain realized $560

Now the tax would be

= $560 × 15% preferential rate

= $84