Maren received 12 NQOs (each option gives her the right to purchase 13 shares of
ID: 2459717 • Letter: M
Question
Maren received 12 NQOs (each option gives her the right to purchase 13 shares of stock for $10 per share) at the time she started working when the stock price was $8 per share. When the share price was $17 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 and how much tax will she pay assuming her marginal tax rate is 35 percent and long-term capital gains rate is 15 percent??
A. $1,872 gain and $281 tax.
B. $0 gain and $0 tax
C. $780gain and $273 tax
D. $780 gain and $117 tax
Explanation / Answer
Given data,
Sale price of share =$22
Purchase price = $10
Number of shares per option = 13
Number of options = 12
Capital gain tax = 15%
Profit per share = Selling Price - Purchase Price
= $22 - $10
= $12
Profit per option = Profit per share * number of shares
= $12 * 13
= $156
Total profit or gain = Profit per option * number of options
= $156 * 12
= $1872
Tax = Capital gain Tax
= Gain * Capital gain rate
= 1872 * 15%
= $280.80
= $281 (approx.)
Correct option is A) $1872 gain and $281 tax