Wilson Corporation Granted an Incentive Stock Option to Reva on January

question 73

Multiple Choice

Wilson Corporation granted an incentive stock option to Reva on January 1, two years ago. The option price was $300, and the FMV of the Wilson stock was also $300 on the grant date. The option allowed Reva to purchase 150 shares of Wilson stock. Reva exercised the option on August 1, this year, when the stock's FMV was $400. Unless otherwise stated, assume Reva is a qualifying employee. The results of the above transactions to Reva will be

• A) ordinary income to Reva on the exercise date of $15,000.
• B) no income to Reva on the grant date or exercise date but there is an alternative minimum tax adjustment item to Reva of $15,000.
• C) no income tax or alternative minimum tax effect for Reva.
• D) capital gain to Reva on the exercise date of $15,000.

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Definitions:

Newspaper Industry

Refers to the sector of the economy that is engaged in the production and distribution of newspapers, involving both print and, increasingly, digital platforms.

Shrink

The reduction in inventory due to factors such as theft, damage, or errors in record-keeping.

Output

The total amount of goods or services produced by a company or economy in a given period.

Economies of Scale

The cost advantages that enterprises obtain due to their scale of operation, typically resulting in the reduction of cost per unit.