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Hazel Received 20 NQOs (Each Option Gives Her the Right

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Essay

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 exercises all of her options.If Hazel holds the shares for two years 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 24 percent and long term capital gain tax rate is 15 percent?


Definitions:

Chromosomes

Thread-like structures located inside the nucleus of animal and plant cells, made of protein and a single molecule of DNA, carrying genetic information in the form of genes.

Genes

The basic physical and functional units of heredity, made up of DNA, that dictate biological traits and characteristics.

Sperm Cell

A male reproductive cell designed to fertilize an egg cell, contributing half of the genetic material to the offspring.

By-products

Materials produced as a residual or secondary product during the manufacturing process or chemical reactions.

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