Question

Six years ago, HOPCO granted Mr. Sing a nonqualified option to purchase 1,000 shares of HOPCO stock at $55 per share. On date of grant, the market price was $50 per share. This year, Mr. Sing exercised the option when the market price was $64 per share. How much ordinary income does Mr. Sing recognize because of the exercise

Answer 1

Based on the option that Mr. Sing exercised, the ordinary income recognized would be $0.

What income will Mr. Sing recognize?

Income will be recognized when the shares are sold by Mr. Sing because the selling price is necessary to calculate income.

As the shares are yet to be sold, there will be no income recognized by Mr. Sing.

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