a. Assume that Susan thinks she will exercise the options in one year (at which

a. Assume that Susan thinks she will exercise the options in one year (at which time Susan thinks the FMV of the stock will be $23) and she will sell the stock one
year after exercise for $25 per share. Under these circumstances should Susan elect to be taxed now or wait until she exercises her options? Why? How much will
Susan pay in taxes under each scenario?
b. Now assume that the price of the stock is estimated to be $21 at the time she plans to exercise and that Susan believes that her marginal tax bracket at time of
exercise will be 28%. She believes that the price of the stock one year after exercise will be $25 per share but that Congress will increase the capital gains tax
rate to 20% from the current 15%. Now which option should Susan choose? Why? What is her tax bill under each scenario?