Yvonne Exercises Incentive Stock Options (ISOs)for 100 Shares of Apple

question 81

Multiple Choice

Yvonne exercises incentive stock options (ISOs) for 100 shares of Apple Corporation stock at the option price of $100 per share on May 21,2016,when the fair market value is $120 per share.She holds the stock for only two years and sells the shares for $115 per share.Determine the recognized gain on the sale and classify it as capital or ordinary.

• A)$2,000 ordinary income and $2,000 STCG.
• B)$2,000 ordinary income and $2,000 LTCG.
• C)$4,000 ordinary income.
• D)$1,500 LTCG.
• E)None of the above.

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Definitions:

Consolidating

The process of combining financial statements of separate entities within a corporate group to present as if they were a single economic entity.

Capital Fund

A fund dedicated to financing long-term investment projects or for acquiring fixed assets.

Unrestricted Contribution

Donations or funding received without stipulations on how they must be spent, allowing the recipient discretion in their use.

Useful Life

The expected period of time during which an asset is useful to the average owner and can generate income or benefits.