This Year,Haven Corporation Granted a Nonqualified Stock Option to Olivia

question 108

Essay

This year,Haven Corporation granted a nonqualified stock option to Olivia to buy 5,000 shares of Haven stock for $20 for five years.At date of grant,Haven stock was selling on the Nasdaq for $19 per share.For financial statement purposes,Haven recorded $16,500 compensation expense for the estimated value of the option.
a.How much income must Olivia recognize as a result of the grant of the option?
b.Can Haven deduct the $16,500 compensation expense on this year's tax return?
c.Assuming a 21% tax rate,compute Haven's deferred tax asset or deferred tax liability (identify which)resulting from the $16,500 compensation expense.

Understand the concept of a precedent and how it is applied in legal cases.

Understand the classification and purposes of different types of law.

Recognize legal remedies and their applications in law.

Identify the hierarchy and conflict resolution in sources of law.

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Definitions:

Home Improvement Loan

A type of loan intended to finance the renovation or repair of a home.

Equal Monthly Payments

Payments of equal amount made each month over a specified period, commonly associated with loans or financing plans.

Compounded Monthly

Interest calculation method where the interest gains are added to the principal each month, affecting subsequent interest accruals.

Extra Interest

Additional interest that may be charged due to various factors, such as late payments or changes in terms.