Determine if the stock options meet the requirements

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Reference no: EM131265663

Compensation Assignment

A company granted stock options to the following employees including their exercise and sale details:

Employee Name

Date Option Given

Total Number of Stock Options Granted

Fair Market Value on the Date of Stock Options

Date the Employee Actually Exercised the option

Date the Employee Sold the stocks

Price at which the employee sold the stocks

Total Stocks Sold

Joseph

4/21/2009

1500

$55

5/1/2010

4/21/2011

$72

1200

Brandy

3/31/2008

4500

$48

4/1/2010

4/1/2011

$59

4000

Turner

5/3/2007

2000

$32

3/1/2009

4/5/2012

$48

2000

Your Assignment:

Read the lecture notes on incentive stock options (ISOs). For each of the employees,

a. determine if the stock options meet the requirements for an ISO or not. If not, what changes would you recommend to the company to make it as a qualified stock option?

b. Calculate the gain or loss and explain whether the gain or loss is to be treated as ordinary income or capital gains.

Note: If some information is missing, you can assume that the conditions are met for ISOs. For example, you can assume that the board of directors approved the grant of the options within the time period specified.

Attachment:- stock options.pdf

Verified Expert

The Solution is prepared on the guidelines for ESOP (Employee Stock Option Plan). ESOP is the stock option granted to the employees. Employees in that case is having exclusively right to purchase the shares in low price. Exercise date for the same is already fixed.

Reference no: EM131265663

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