Gilda started working for her new employer. She received 20 NQOs with each optio

Question

Gilda started working for her new employer. She received 20 NQOs with each option giving her the … 10 shares of stock for $7 per share. At the time that she started watching the stock price it was $14 per share. Gilda has worked for her employer for 3 years. Now that the share price is $20 per share. Glade exercises all of her options. Two years later, Gilda sold her shares for $30 per share. What amount of gross income must Gilda recognize at the following? a. Grant Date: b. Exercise Date: c. Sales Date:

Explanation / Answer

NQO =20 nos. Each option gives 10 shares . so total option =200 shares

Option grant price =$7 per share . To grant value =$1,400

Grant Date= No Income recognized on grant date

Exercise Date : Income = Fair market value on exercise date- Option Price

Fair market value on exercise date =$20*200=$4,000

Ordinary Income on exercise date = $4,000-$1,400= $2,600

Sales date : Sales price =$30,

Sales value =$6,000

Income =Capital Gain= sales price – (Option price + ordinary income on exercise)

= 6,000-(1,400+2,600)= $2,000

So capital gain on sales date = $2,000

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