Suzanne Received 21 ISOs (Each Option Gives Her the Right

question 50

Essay

Suzanne received 21 ISOs (each option gives her the right to purchase 21 shares of stock for $12 per share)at the time she started working, when the stock price was $13 per share. Three years later, when the share price was $24 per share, she exercised all of her options. If Suzanne holds the shares for two additional years and sells them when the market price is $34, how much gain will Suzanne recognize on the sale and how much tax will she pay, assuming her marginal tax rate is 37 percent?

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Definitions:

Semiweekly Schedule Depositor

This term refers to businesses that are required to deposit employment taxes on a semiweekly basis, typically when they have accrued a certain amount of tax liability.

Tax Liability

The total amount of tax owed to federal, state, or local tax authorities for a given period.

Form 4070

A tax form used by employees in the United States to report tips received to their employer.

Tax Withholding

The portion of an employee's wages that is not included in their paycheck because it is sent directly to the federal, state, or local tax authorities as partial payment of income tax.