Jackson Corporation Granted an Incentive Stock Option to Employee Caroline

question 73

Multiple Choice

Jackson Corporation granted an incentive stock option to employee Caroline on January 1,two years ago.The option price was $150,and the FMV of the Jackson stock was also $150 on the grant date.The option allowed Caroline to purchase 160 shares of Jackson stock.Caroline exercised the option on August 1,2013,when the stock's FMV was $250.Unless otherwise stated,assume Caroline is a qualifying employee.If Caroline sells the stock on July 5,2014 for $400 per share,she must recognize

• A)long-term capital gain of $40,000 in the year of sale.
• B)long-term capital gain of $24,000 in the year of sale.
• C)ordinary income of $16,000 on the exercise date and a long-term capital gain of $24,000 in the year of sale.
• D)ordinary income of $16,000 and a short-term capital gain of $24,000 in the year of sale.

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The basic rate or frequency at which an event occurs within a given population under general conditions.

Junior Team

A group or team composed of younger or less experienced members, often designated in sports and organizations for development and training purposes.

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The perspective or manner in which information is presented, which can influence perception and decision-making.

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Quantities or volumes that are large enough to be noteworthy or have a considerable impact or importance in a specific context.