Martin Corporation Granted a Nonqualified Stock Option to Employee Caroline $$\begin{array} { | l | l | } \hline 2016 & 2017 \\\hline\$ 100,000 \text { ordinary income } & \$ 50,000 \text { LTCG } \\\hline \end{array}$$

question 52

Multiple Choice

Martin Corporation granted a nonqualified stock option to employee Caroline on January 1, 2013. The option price was $150, and the FMV of the Martin stock was also $150 on the grant date. The option allowed Caroline to purchase 1,000 shares of Martin stock. The option itself does not have a readily ascertainable FMV. Caroline exercised the option on August 1, 2016 when the stock's FMV was $250. If Caroline sells the stock on September 5, 2017 for $300 per share, she must recognize

• A) \[\begin{array} { | l | l | }
• \hline 2016 & 2017 \\
• \hline\$ 100,000 \text { ordinary income } & \$ 50,000 \text { LTCG } \\
• \hline
• \end{array}\]
• B) \[\begin{array} { | l | l | }
• \hline 2016 & 2017 \\
• \hline0 & \$ 150,000 \text { LTCG } \\
• \hline
• \end{array}\]
• C) \[\begin{array} { | l | l | }
• \hline 2016 & 2017 \\
• \hline\$ 100,000 \text { ordinary income } & \$ 50,000 \text { ordinary income } \\
• \hline
• \end{array}\]
• D) \(\begin{array}{|l|l|}
• \hline2016 & 2017 \\
• \hline 0 & \$ 150,000 \text { ordinary income }\\\hline
• \end{array}\)

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Definitions:

Allele Frequencies

The relative frequencies of different alleles of a particular gene in a given population.

Genotype Frequencies

The distribution of the different genetic constitutions within a population.

Fixing Beneficial Allele

The process by which a favorable genetic variant becomes present in all individuals within a population due to natural selection.

Population Size

The total number of individuals within a defined area at a specific time.