Several years ago, Mr. Kerry Johnson's employer gave him options to purchase 1,000 shares of the employer's stock at a price of $13.25 per share. At that time, the shares were trading at $13.25 per share. The employer is a publicly traded company. During June, 2020, Mr. Johnson exercises the options. At this time, the shares are trading at $18.50 per share. Prior to the end of the year, Mr. Johnson sells the shares for $19.75 per share. Determine the effect of these transactions on Mr. Johnson's Net Income For Tax Purposes and Taxable Income. Where relevant, identify these effects separately.

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The Answer of Several years ago, Mr. Kerry Johnson's employer gave him options to purchase 1,000 shares of the employer's stock at a price of $13.25 per share. At that time, the shares were trading at $13.25 per share. The employer is a publicly traded company. During June, 2020, Mr. Johnson exercises the options. At this time, the shares are trading at $18.50 per share. Prior to the end of the year, Mr. Johnson sells the shares for $19.75 per share. Determine the effect of these transactions on Mr. Johnson's Net Income For Tax Purposes and Taxable Income. Where relevant, identify these effects separately.

Several Years Ago, Mr