On October 2,2017,Miriam sells 1,000 shares of stock at $20 per share.Miriam acquired the stock on November 12,2016,when she exercised her option to purchase the shares through her company's incentive stock option plan.The exercise price was $11 per share and the fair market value of the stock at the date of exercise was $14 per share.For 2017,Miriam must report

Ordinary Capital
Income Gain
A)$3,000 $6,000
B)$6,000 $3,000
C)$9,000 $-0-
D)$-0- $9,000

Question

On October 2,2017,Miriam sells 1,000 shares of stock at $20 per share.Miriam acquired the stock on November 12,2016,when she exercised her option to purchase the shares through her company's incentive stock option plan.The exercise price was $11 per share and the fair market value of the stock at the date of exercise was $14 per share.For 2017,Miriam must report
​
Ordinary Capital
Income Gain
A)$3,000 $6,000
B)$6,000 $3,000
C)$9,000 $-0-
D)$-0- $9,000

Quizplus · Accepted Answer

Miriam has a capital gain of $9,000 ($20 - $11 = $9 per share x 1,000 shares = $9,000). However, because the stock was acquired through an incentive stock option plan, the gain is taxed as ordinary income. Therefore, Miriam must report $9,000 of ordinary income and $0 of capital gain.

On October 2,2017,Miriam Sells 1,000 Shares of Stock at $20