Maren Received 10 NQOs (Each Option Gives Her the Right

question 109

Multiple Choice

Maren received 10 NQOs (each option gives her the right to purchase 10 shares of stock for $8 per share) at the time she started working when the stock price was $6 per share. When the share price was $15 per share, she exercised all of her options. Eighteen months later she sold all of the shares for $20 per share. How much gain will Maren recognize on the sale of the shares and how much tax will she pay assuming her marginal tax rate is 37 percent?

• A)$0 gain and $0 tax
• B)$500 gain and $100 tax
• C)$500 gain and $185 tax
• D)$1,200 gain and $240 tax

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Definitions:

Cycle Inventory

The portion of inventory that a business holds to meet its regular sales demand during a specific period.

Space Cost

Expenses related to the physical space required for operations, such as warehousing or retail locations.

Handling Cost

The expenses involved in moving, storing, and managing goods, including labor, materials, and overhead.

Storage Costs

Expenses incurred to keep inventory stored safely and effectively, including warehousing, material handling, and preservation costs.