An employee receives an Incentive Stock Option on 7-1-17 to buy 3,000 shares of XYZ Inc. stock at $10 per share (its fair market value at the time). The employee exercises the option on 8-2-18 when the fair market value of the stock is $21 per share. The employee receives 3,000 shares of XYZ Inc. at $10 per share. On 9-3-19 the employee gifts (joint with her husband) 750 shares of the stock to the her child when the fair market value is at $30. The employee continues to do this for the next three years that the child is in college as well. The employee has satisfied her ISO holding requirement of holding her stock for two years after the grant date and one year after the exercise date. The child will realize $15,000 of long term capital gain for each of 4 years ($30/share x 750 shares) less ($10/share basis x 750 shares).