On January 31 of This Year,Mallory Pays $800 for an Option

question 36

Multiple Choice

On January 31 of this year,Mallory pays $800 for an option to acquire 100 shares of Mesa Corporation common stock for $85 per share.As a result of an increase in the market value of the Mesa stock,the market price of the option increases and Mallory sells the option for $1,000 on August 4.As a result of the sale,Mallory must recognize

• A)$200 STCG.
• B)$800 STCG.
• C)$200 ordinary income.
• D)$800 ordinary income.

---

Definitions:

Dump Truck

A truck with a large, tiltable bed used for transporting and unloading bulk material.

Directional Control Valve

A valve that functions to direct or block flow through selected channels or circuits.

Spool Valve

Commonly used hydraulic valve in which a sliding spool within a valve body is used to open and close hydraulic subcircuits.

Hydraulic Circuits

systems that use fluid under pressure to perform a variety of actions in machinery and equipment, often for power transmission.