Author Question: Jackson Corporation granted an incentive stock option to employee Caroline on January 1, two years ... (Read 62 times)

Evvie72 · **on:** Sep 13, 2020

Jackson Corporation granted an incentive stock option to employee Caroline on January 1, two years ago. The option price was $150, and the FMV of the Jackson stock was also $150 on the grant date. The option allowed Caroline to purchase 160 shares of Jackson stock. Caroline exercised the option on August 1, 2015, when the stock's FMV was $250. Unless otherwise stated, assume Caroline is a qualifying employee. If Caroline sells the stock on July 5, 2016 for $400 per share, she must recognize
◦ long-term capital gain of $40,000 in the year of sale.
◦ long-term capital gain of $24,000 in the year of sale.
◦ ordinary income of $16,000 on the exercise date and a long-term capital gain of $24,000 in the year of sale.
◦ ordinary income of $16,000 and a short-term capital gain of $24,000 in the year of sale.

trampas · **Reply #1 on:** Sep 13, 2020

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