On November 19,2015,Rex Is Granted a Nonqualified Stock Option to Purchase

question 17

Essay

On November 19,2015,Rex is granted a nonqualified stock option to purchase 100 shares of Tan Company.On that date,the stock is selling for $8 per share,and the option price is $9 per share.Rex exercises the option on August 21,2016,when the stock is selling for $10 per share.Five months later,Rex sells the shares for $11.50 per share.
a.What amount is included in Rex's gross income in 2015?
b.What amount is included in Rex's gross income in 2016?
c.What amount and type of gain is recognized by Rex in 2017?
d.What amount,if any,is deductible by Tan Company in 2016?
e.What amount,if any,is recognized in 2016 if the stock is sold for $9.50 per share?

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Definitions:

Monthly Statements

Financial reports issued by banks or financial institutions to account holders, detailing the transactions and balances for a month.

Mail Time

The time taken for mail or documents to be delivered from sender to recipient, often considered in business contexts where processing or response times are critical.

Money Market Instrument

Short-term debt securities that are highly liquid and considered to be safe investments.

Treasury Bills

Treasury Bills are short-term government securities issued at a discount from the par value and mature in one year or less, serving as a safe investment.