Generally, the exercise of an in-the-money option will result in a capital gain equal to the excess of the fair market value of the underlying less what was paid to exercise the option. This capital gain is taxable at a maximum rate of 26.5%, but may be less if the insider's annual income is less than approximately $250,000. However, a different set of rules will apply to the exercise of options obtained by a taxpayer in the course of his employment (for example, options issued to a director).