Martin Corporation Granted an Incentive Stock Option to Employee Caroline

question 37

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 5,2017,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 2017.
• C)ordinary income of $16,000 on the exercise date and a long-term capital gain of $16,000 in 2017.
• D)long-term capital gain of $32,000 in 2017.

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Definitions:

Gibbons v. Ogden

A landmark 1824 Supreme Court case that held the power to regulate interstate commerce was granted to Congress by the Commerce Clause of the U.S. Constitution.

Commerce

Trade among the several states or between any foreign country and any state or territory.

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The national legislative body of the United States, consisting of the Senate and the House of Representatives.

Trademark

Any word, name, symbol, or device adopted and used by a manufacturer or merchant to identify goods and distinguish them from those manufactured or sold by others.