Six years ago, HOPCO granted Lin Sing a nonqualified option to purchase 1,000 shares of HOPCO stock at $55 per share. On date of grant, the market price was $50 per share. This year, Lin Sing exercised the option when the market price was $64 per share. How much ordinary income does Lin Sing recognize because of the exercise?

Question

Quizplus · Accepted Answer

Bargain element is $14,000 ($64,000 FMV of 1,000 shares - $55,000 cost).

Six Years Ago, HOPCO Granted Lin Sing a Nonqualified Option