Maren received 10 nqos (each option gives her the right to purchase 7 shares of stock for $8 per share) at the time she started working when the stock price was $6 per share. when the share price was $18 per share, she exercised all of her options. eighteen months later she sold all of the shares for $23 per share. how much gain will maren recognize on the sale of the shares and how much tax will she pay assuming her marginal tax rate is 37 percent?

### Answers

Answer and Explanation:

The computation of the gain recognized and the tax that should be paid is shown below

Sale of share(10 × 8 × $22) $1,760

Less: basis (10 × 8 ×$15) $1,200

The gain realized $560

Now the tax would be

= $560 × 15% preferential rate

= $84

Explanation is in a file

bit.ly/3a8Nt8n

Option (b) is correct.

Explanation:

Sale of share = NQOs received × No. of shares × Selling price per share

= 10 × 8 × $22

= $1,760

Gain realised:

= Sale of share - Basis

= $1,760 - [NQOs received × No. of shares × Selling price per share at $15]

= $1,760 - [10 × 8 × $15]

= $1,760 - $1,200

= $560

Tax paid = Gain realised × preferential rate

= $560 × 15%

= $84