Maren Received 10 NQOs (Each Option Gives Her the Right

question 60

Multiple Choice

Maren received 10 NQOs (each option gives her the right to purchase 10 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 $15 per share,she exercised all of her options.Eighteen months later she sold all of the shares for $20 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 39.6 percent?

• A) $0 gain and $0 tax.
• B) $500 gain and $100 tax.
• C) $500 gain and $175 tax.
• D) $1,200 gain and $180 tax.

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Definitions:

Carnivorous Plants

Plants that derive some or most of their nutrients from trapping and consuming animals or protozoans, typically insects and other arthropods.

Nitrogen

A chemical element with symbol N and atomic number 7, essential to all living organisms as a constituent of proteins and nucleic acids.

Essential Elements

Nutrients required for organisms to survive and reproduce, that cannot be synthesized internally and must be obtained from the environment.

Leaf

A flattened structure of a higher plant, typically green and blade-like, that is attached to a stem directly or via a stalk. Leaves are the main organs of photosynthesis and transpiration.