S Receives Incentive Stock Options (ISOs) as Part of a Compensation

question 7

Multiple Choice

S receives incentive stock options (ISOs) as part of a compensation plan.The unrestricted option is for 100 shares at $100 per share.S exercises the option five years later when the FMV of the stock is $190 per share.S holds the stock for five more years and then sells it for $225 per share.Regarding the sale by S of the ISO stock, S will have a regular tax gain and AMT gain, respectively, of

• A)$2,500 and $12,500
• B)$22,500 and $3,500
• C)$13,590 and $12,500
• D)$12,500 and $13,590
• E)$12,500 and $3,500

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Definitions:

Nonconforming Goods

Products delivered under a sale contract that do not meet the specifications, quality, or quantity as stipulated by the agreement.

Seek Damages

The act of demanding compensation, typically through legal action, for harm or loss suffered due to another's actions or negligence.

Magnuson-Moss Act

A federal law enacted in 1975 to protect consumers from deceptive warranty practices, applying to warranties on consumer products.

Limited Warranty

A warranty with certain conditions and limitations on the parts covered, duration of coverage, and types of defects that are covered.