Six years ago, HOPCO granted Mrs. Sing an incentive stock option (ISO) to purchase 1,000 shares of HOPCO stock for $55 per share. On date of grant, the market price was $50 per share. This year, Mrs. Sing exercised the ISO when the market price was $64 per share. How much ordinary income does she recognize because of the exercise?

Question

Quizplus · Accepted Answer

When exercising an incentive stock option (ISO), the difference between the market price at the time of exercise and the exercise price does not result in ordinary income. Therefore, Mrs. Sing recognizes $0 in ordinary income from the exercise of the ISO.

Six Years Ago, HOPCO Granted Mrs