How is the bargain element for a stock option calculated?
A)The difference between the strike price and the market price on the date of grant
B)The difference between the market price on the exercise date and the market price on the date of grant
C)The difference between the market price on the exercise date and the strike price
D)The difference between the market price on the sale date and the strike price

Question

Quizplus · Accepted Answer

The bargain element for a stock option is calculated as the difference between the market price on the exercise date and the strike price. This represents the discount given to the option holder and is typically taxable as ordinary income.

How Is the Bargain Element for a Stock Option Calculated