compensation package includes incentive stock options. She was granted 100 ISO on October 1, XX01, when the stock was selling for $62 per share. The exercise pr of the options is $75 per share. Kim has to wait until January 1, XX02 to exercise h options. The options expire on September 30, XX03. Kim exercised her options on August 27, XX03 when the stock was selling for $107 per share. She sold her 100 shares on March 5, XX04 for $118 per share. Calculate and characterize the gain k must recognize from the March 5, XX04 sale.

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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Kim holds an executive position at Taylors and Taylors, Incorporated. Her
compensation package includes incentive stock options. She was granted 100 ISOs
on October 1, XX01, when the stock was selling for $62 per share. The exercise pri
of the options is $75 per share. Kim has to wait until January 1, XX02 to exercise h
options. The options expire on September 30, XX03. Kim exercised her options on
August 27, XX03 when the stock was selling for $107 per share. She sold her 100
shares on March 5, XX04 for $118 per share. Calculate and characterize the gain K
must recognize from the March 5, XX04 sale.
A) $0
B) $4,300 long-term capital gain
C) $3,200 ordinary income; $1,100 short-term capital gain
D) $1,300 ordinary income; $4,300 short-term capital gain
Transcribed Image Text:Kim holds an executive position at Taylors and Taylors, Incorporated. Her compensation package includes incentive stock options. She was granted 100 ISOs on October 1, XX01, when the stock was selling for $62 per share. The exercise pri of the options is $75 per share. Kim has to wait until January 1, XX02 to exercise h options. The options expire on September 30, XX03. Kim exercised her options on August 27, XX03 when the stock was selling for $107 per share. She sold her 100 shares on March 5, XX04 for $118 per share. Calculate and characterize the gain K must recognize from the March 5, XX04 sale. A) $0 B) $4,300 long-term capital gain C) $3,200 ordinary income; $1,100 short-term capital gain D) $1,300 ordinary income; $4,300 short-term capital gain
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