Kaijsa received 22 NQOs (each option gives her the right to purchase 29 shares o

Question

Kaijsa received 22 NQOs (each option gives her the right to purchase 29 shares of stock for $8 per share) from her employer at the time she started working when the stock price was $12 per share. Now that the share price is $18 per share, she intends to exercise all of her options. If Kaijsa holds the shares for two years and sells them when the market price is $25, what is the amount of the deduction and tax savings her employer will receive (assume the employer's marginal tax rate is 30 percenti?

Explanation / Answer

Deduction will be equal to bargain element

22 options * 29 shares * ($18-$8) = $6380

Deduction: $6380

Tax savings at 30% : $1914

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