Jackson Corporation Granted an Incentive Stock Option to Employee Caroline

question 117

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 1,2015,when the stock's FMV was $250.Unless otherwise stated,assume Caroline is a qualifying employee.If Caroline sells the stock on July 5,2016 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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Definitions:

Workplace Giving

Programs that allow employees to donate to charitable causes through payroll deductions or company-sponsored charity events.

Brand Loyalty

The tendency of consumers to continuously purchase products from the same brand rather than switching to competitors.

Brand Awareness

The extent to which consumers are familiar with the qualities or image of a particular brand of goods or services.

Situation Analysis

The process of evaluating an organization's or individual's current situation to understand the context for decision-making or strategy development.