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:

E2 Mechanism

The E2 mechanism is a bimolecular eliminative reaction in organic chemistry where a hydrogen atom is removed from a β-carbon as a leaving group departs, forming a double bond.

Stereochemistry

The branch of chemistry concerned with the spatial arrangement of atoms in molecules and the impact of this arrangement on chemical reactions and properties.

2-Bromo-2-methylpentane

An organic compound consisting of a six-carbon chain with a bromo substituent and a methyl group both located on the second carbon atom.

Potassium Tert-butoxide

A strong, non-nucleophilic base used in organic synthesis to deprotonate compounds.