On January 2 Compaq common stock was trading at the what Kelly thought was a bargain price at $ 65 per share. Kelly bought for $ 700 an Option to purchase 100 shares of Compaq at the price of $ 80 on or before March 15. After the corporation reported its earnings, the stock value jumped, and upon March 1 the price was bouncing between $ 95 and $ 100 per share. Kelly sold his option for $ 3000. Determine the tax consequences?
What result if the value of Compaq had fallen to $ 60 per share on March 15 and Kelly let the option expire, unexercised?