Yvonne exercises incentive stock options (ISOs) for 100 shares of Apple Corporation stock at the option price of $100 per share on May 21, 2019, when the fair market value is $120 per share.She holds the stock for only two years and sells the shares for $115 per share.Determine the recognized gain on the sale and classify it as capital or ordinary.
A)$2,000 ordinary income and $2,000 STCG.
B)$2,000 ordinary income and $2,000 LTCG.
C)$4,000 ordinary income.
D)$1,500 LTCG.
E)None of these.

Question

Quizplus · Accepted Answer

The recognized gain on the sale is $1,500, calculated as the difference between the sale price ($115 per share) and the option price ($100 per share), multiplied by the number of shares (100). Since Yvonne held the stock for more than one year, the gain is classified as long-term capital gain (LTCG).

Yvonne Exercises Incentive Stock Options (ISOs) for 100 Shares of Apple