NSOs are generally taxed (for regular federal income tax purposes) upon exercise in an amount equal to the difference between the exercise price and the fair market value (FMV) of the shares on the date of exercise. Thus, here it appears you would owe tax on all of the shares you sold, the 300 shares used to fund the purchase, and the 100 you sold to cover the tax liability. Essentially, you exercised the option to purchase 1,000 shares at .10 and thereafter you sold 400 shares at .50, leaving you with a gain of .40 per share sold.
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