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

question 66

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 21,2012,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:

Circular-Flow Diagram

A visual model of the economy that shows how dollars flow through markets among households and firms.

Supply and Demand

The fundamental economic model describing how prices fluctuate based on the interplay between the quantity of a good available and the desire for that good.

Macroeconomic Analysis

The study of the behavior, structure, and decision-making of an economy as a whole, including topics like inflation, unemployment, and economic growth.

Microeconomic Analysis

The study of the behavior of individuals and firms in making decisions regarding the allocation of limited resources.