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Hazel Received 20 NQOs (Each Option Gives Her the Right

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Hazel received 20 NQOs (each option gives her the right to purchase 10 shares of stock for $7 per share)at the time she started working, when the stock price was $14 per share. Now that the share price is $20 per share, she intends to exercise all of her options. If Hazel holds the shares for two years after exercise and sells them when the market price is $25, how much gain will Hazel recognize on the sale and how much tax will she pay, assuming her marginal tax rate is 37 percent?


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