3. On June 1, 2017, ABC Corp. granted 500 Incentive Stock Options to one of thei

Question

3. On June 1, 2017, ABC Corp. granted 500 Incentive Stock Options to one of their executives, Michael. The stock had an option price of $25. On December 31,2017, Michael exercised all of his options when the market price per share was $50. What is the basis of his stock and how much should be included on his Form W-2 as income for 2017? (2pts) 4. On March 1. 2017, Wasley Corp. granted 1,000 Non-qualified Stock Options to Haley (arn employee). The exercise price on the shares was $23 per share. On December 31, 2017, Haley exercised all of her options when the market price per share was $43. What is the basis of her stock, and what amount should be included on her Form W-2 as wage income in 2017? (2pts)

Explanation / Answer

Ans 3.

Exercise Price for Michael is $25

Fair Market Value of Stock is: $50

So Basis is $25 per share

Now since the option scheme used to grant these Stocks is ISO, so there will be no impact on Form W-2. However Michael has to fill Form 6251 to figure out if there is any MAT requirement for him.

Ans 4.

Exercise price for Haley is: $23 per share

Fair Market Value of share is: $43 per share

So Basis is $ 20 per share.

Now since this is a NQSO option, so there will be an impact on W2 form of Haley.

Total Income added in W2 form of Haley will be 20*1000 = 20000$ and tax will be levied on it.

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