Martin Corporation Granted an Incentive Stock Option to Employee Caroline

question 249

Multiple Choice

Martin Corporation granted an incentive stock option to employee Caroline on January 1, 2012. 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, 2016, when the stock's FMV was $250. Unless otherwise stated, assume Caroline is a qualifying employee. If Caroline sells the stock on September 5, 2018, 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) ordinary income of $16,000 on the exercise date and a long- term capital gain of $16,000 in 2018.
• C) long- term capital gain of $32,000 in 2018.
• D) long- term capital gain of $16,000 in 2018.

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Definitions:

Immediate Predecessor

A term used in project management and planning, referring to an activity that directly precedes another activity in a sequence, without any intervening activities.

Activity Durations

Activity Durations refer to the length of time needed to complete specific tasks or activities within a project or process.

Project Organization

A structure designed for executing projects, where teams are assembled to focus on specific objectives within a limited timeframe.

Specific Goal

A clearly defined and measurable objective that an individual or organization aims to achieve within a specific timeframe.