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In 2011, BB granted an incentive stock option (ISO) to Mr. Yarnell to buy 7,000 shares of BB stock at $8.50 per share for 10
In 2011, BB granted an incentive stock option (ISO) to Mr. Yarnell to buy 7,000 shares of BB stock at $8.50 per share for 10 years. At date of grant, BB stock was trading on the AMEX for $8.09 per share. In 2020, Mr. Yarnell exercised the option when BBs stock was trading at $24.27 per share.
Required:
- How much income did Mr. Yarnell recognize in 2011 and 2020 because of the ISO?
- Compute Mr. Yarnells basis in the 7,000 shares.
- What are the tax consequences of the stock option to BB in 2011 and 2020?
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