Wilson Corporation Granted an Incentive Stock Option to Reva on January

question 39

Multiple Choice

Wilson Corporation granted an incentive stock option to Reva on January 1,two years ago.The option price was $300,and the FMV of the Wilson stock was also $300 on the grant date.The option allowed Reva to purchase 150 shares of Wilson stock.Reva exercised the option on August 1,this year,when the stock's FMV was $400.Unless otherwise stated,assume Reva is a qualifying employee.The results of the above transactions to Reva will be

• A)no income to Reva on the grant date or exercise date but there is an alternative minimum tax adjustment item to Reva of $15,000.
• B)no income tax or alternative minimum tax effect for Reva.
• C)ordinary income to Reva on the exercise date of $15,000.
• D)capital gain to Reva on the exercise date of $15,000.

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Definitions:

Sealed Auction

An auction format in which all bids are submitted simultaneously in sealed envelopes, and the highest bid wins without bidders knowing the bid amounts of others.

Oral Auction

In this auction type, bidders submit increasing bids until only one bidder remains. The item is awarded to the last remaining bidder.

Oral Auction

An auction conducted by an auctioneer who calls out prices of items for which participants physically present place bids verbally.

Expected Selling Price

The price at which a seller anticipates being able to sell a product or service.