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

question 68

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 seven months and sells the shares for $140 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) $4,000 LTCG.
• E) None of the above.

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Definitions:

Fatty Acids

Long hydrocarbon chains that are a vital component of lipids and play an essential role in energy storage and cell structure.

Catabolized

The process by which substances are broken down into smaller molecules to release energy.

Ketogenesis

A metabolic process where the liver produces ketone bodies from fatty acids, which serve as an alternative energy source when glucose is low.

Acetyl CoA

A molecule involved in many biochemical reactions, serving as a key intermediary in the synthesis and oxidation of fatty acids and in the Krebs cycle for energy production.