Nestor receives the right to acquire 1,000 shares of Knolls Corporation stock through the company's incentive stock option plan. The fair market value of the stock at the date of the grant is $20 and the exercise price of the option is $24 per share. For the option to qualify as an incentive stock option
I.Nestor must exercise the option within 10 years of the date of grant.
II.Nestor must hold the stock for at least 2 years after the date of exercise before selling it.

A)Only statement I is correct.
B)Only statement II is correct.
C)Both statements are correct.
D)Neither statement is correct.

Question

Nestor receives the right to acquire 1,000 shares of Knolls Corporation stock through the company's incentive stock option plan. The fair market value of the stock at the date of the grant is $20 and the exercise price of the option is $24 per share. For the option to qualify as an incentive stock option
I.Nestor must exercise the option within 10 years of the date of grant.
II.Nestor must hold the stock for at least 2 years after the date of exercise before selling it.
​
A)Only statement I is correct.
B)Only statement II is correct.
C)Both statements are correct.
D)Neither statement is correct.

Quizplus · Accepted Answer

Nestor must exercise the option within 10 years of the date of grant for it to qualify as an incentive stock option. However, the requirement is to hold the stock for at least 2 years after the date of grant and 1 year after exercise before selling it, not 2 years after exercise.

Nestor Receives the Right to Acquire 1,000 Shares of Knolls