On October 23,2017,McIntyre sells 700 shares of stock at $26 per share.McIntyre acquired the stock on June 1,2016,when he exercised his option to purchase the shares through his company's incentive stock option plan.The exercise price was $12 per share and the fair market value of the stock at the date of exercise was $16 per share.For 2017,McIntyre must report

Ordinary Capital
Income Gain
A)$-0- $7,000
B)$-0- $9,800
C)$9,800 $-0-
D)$2,800 $7,000

Question

On October 23,2017,McIntyre sells 700 shares of stock at $26 per share.McIntyre acquired the stock on June 1,2016,when he exercised his option to purchase the shares through his company's incentive stock option plan.The exercise price was $12 per share and the fair market value of the stock at the date of exercise was $16 per share.For 2017,McIntyre must report
​
Ordinary Capital
Income Gain
A)$-0- $7,000
B)$-0- $9,800
C)$9,800 $-0-
D)$2,800 $7,000

Quizplus · Accepted Answer

McIntyre must report the capital gain on the sale of the stock. The capital gain is calculated by subtracting the exercise price ($12) from the selling price ($26), resulting in a capital gain of $14 per share. McIntyre has 700 shares, so his total capital gain is $9,800. He does not need to report ordinary income because he did not sell any shares within one year of exercising his option.

On October 23,2017,McIntyre Sells 700 Shares of Stock at $26