Ava received 100 NQOs (each option provides a right to purchase 10 shares of CAM stock for $8 per share). On 8/15/Y5 CAM's stock price is $22 per share, Ava exercised all of her options. After acquiring the CAM shares with her stock options, she held the shares for over one year and sold on 10/1/Y6 them at $34 per share. Ava's ordinary marginal rate is 32 percent and her long-term capital gains rate is 15 percent? What are Ava's taxes due on the sale date (10/1/Y6)? You Answered 8,900 Correct Answer 1,800 margin of error +/- 2

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Capital Gain

Any capital asset when sold can give the seller a higher or lower price from its purchase price leading to a capital gain or capital loss. The time period of holding an asset is decided based on if it is a long term or short-term capital gain. On that basis, the rate of taxation is decided if it is 20%, 15% or according to the tax brackets. The rate of taxation differs in the case of equity or debt, whether long or short term. The capital gain can be adjusted from capital loss to arrive at a net capital gain. The amount of gains and the exemption has to be reported in the tax return filed in the financial year in which the asset was transferred. The tax return can be filed quarterly, monthly, semi-annually or annually.