On January 31 of this year,Jennifer pays $700 for an option to acquire 100 shares of Lifetime Corporation common stock for $70 per share.Jennifer exercises the option on June 2.Jennifer sells the stock on April 30 of next year for $10,000.Jennifer's basis for the stock immediately before the sale is

Question

Quizplus · Accepted Answer

Jennifer paid $700 for the option and then exercised it by purchasing 100 shares of stock for $70 per share, which means she paid an additional $7,000. Her total cost basis for the stock is therefore $7,700 ($700 + $7,000). When she sells the stock for $10,000, her capital gain will be $2,300 ($10,000 - $7,700).

On January 31 of This Year,Jennifer Pays $700 for an Option