Bad Brad received 20 NQOs (each option gives him the right to purchase 30 shares of stock for $10 per share) from his employer.At the time he started working the stock price was $11 per share.Now that the share price is $25 per share,he intends to exercise all of the options.Two years later Bad Brad sells the stock for $27 per share,what is Bad Brad's basis in his stock for purposes of calculating the gain or loss?
A)$6,000.
B)$9,000.
C)$15,000.
D)$16,200.The basis is the $6,000 (600 shares × $10 strike price) cash paid and the $9,000 (600 shares × $15 bargain element) income recognized on the exercise-which is equal to the market price on the exercise date less the strike price.

Question

Quizplus · Accepted Answer

Bad Brad's basis in his stock is the sum of the amount paid to exercise the options ($6,000) and the income recognized upon exercise ($9,000), totaling $15,000.

Bad Brad Received 20 NQOs (Each Option Gives Him the Right