ABC Corporation awarded John 1,000 options in 2015; each option allows him to purchase one share of ABC Corporation stock for $20.The ABC stock was selling for $18 per share at the grant date.In 2017, John exercised the options when the stock's selling price was $40 per share.In 2019, John sells the stock for $50 per share.How much gain does John recognize in 2019 when he sells the stock if they are incentive stock options?

Question

Quizplus · Accepted Answer

John's gain in 2019 is calculated based on the difference between the selling price ($50 per share) and the exercise price ($20 per share) for the 1,000 shares. This results in a gain of $30,000 (($50 - $20) * 1,000).

ABC Corporation Awarded John 1,000 Options in 2015; Each Option