Ruby Corporation Grants Stock Options to Iris on February 1,2013

question 24

Essay

Ruby Corporation grants stock options to Iris on February 1,2013. The options do not have a readily ascertainable value. The option price is $100,and the FMV of the Ruby stock is also $100 on the grant date.The option allows Iris to purchase 200 shares of Ruby stock.Iris exercises the option on August 1,2014,when the stock's FMV is $150. Iris sells the stock on December 5,2015 for $400. Determine the amount and character (i.e.ordinary,LTCG or STCG)of income recognized by Iris and the deduction allowed Ruby Corporation in 2013,2014 and 2015 under the following assumptions:
a.The stock option is an incentive stock option.
b.The stock option is a nonqualified stock option.

---

Definitions:

Genetically Variable

Describes organisms or populations that exhibit genetic diversity, allowing for adaptation and evolution over time.

Characteristics

Features or qualities that distinguish an organism or object from others, often used to classify or identify them.

Life

Life refers to the condition that distinguishes animals, plants, and other organisms from inorganic matter, marked by growth, reproduction, and the capacity to adapt to the environment.

Plant

A living organism belonging to the kingdom Plantae, typically growing in a permanent site, absorbing water and inorganic substances through its roots, and synthesizing nutrients in its leaves by photosynthesis.