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