Martin Corporation Granted an Incentive Stock Option to Employee Caroline

question 15

Multiple Choice

Martin Corporation granted an incentive 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 160 shares of Martin stock.Caroline exercised the option on August 1,2017,when the stock's FMV was $250.Unless otherwise stated,assume Caroline is a qualifying employee.If Caroline sells the stock on September 5,2019,for $350 per share,she must recognize (ignore alternative minimum tax)

• A)0)No gain or loss is recognized at exercise or sale with incentive stock options.
• B)long-term capital gain of $16,000 in 2019.
• C)ordinary income of $16,000 on the exercise date and a long-term capital gain of $16,000 in 2019.
• D)long-term capital gain of $32,000 in 2019.

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