Susan was granted 12,000 of stock options by her employer in 2010. Each option allowed Susan to purchase one share of her employer’s stock for $60 per share. On the date of the grant in 2010, the stock was selling for $48 per share. In 2014, when the stock was selling for $84 per share, Susan exercised her options and purchased 12,000 shares. In 2016, Susan sold the shares of stock for $80 per share. What are the regular income tax consequences to Susan and her employer in 2010, 2014, and 2016 if the options are incentive stock options (ISOs)? Please show your work and explain your calculations. Please ignore alternative minimum tax (AMT) consequences.
How would your answer to 1 (above) questions change if the options are nonqualified stock options (NQSOs)? Please show your work and explain your calculations.