Martin Corporation Granted an Incentive Stock Option to Employee Caroline

question 108

Multiple Choice

Martin Corporation granted an incentive stock option to employee Caroline on January 1,2011.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 1,2013 when the stock's FMV was $250.Unless otherwise stated,assume Caroline is a qualifying employee.If Caroline sells the stock on September 5,2014 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 2014.
• C)ordinary income of $16,000 on the exercise date and a long-term capital gain of $16,000 in 2014.
• D)long-term capital gain of $32,000 in 2014.

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Definitions:

Common Directions

Guidelines or instructions shared among a group to ensure cohesive movements or decisions.

Business-Level Strategy

A plan that outlines how a company will compete in a particular market, including choices about product and service offerings.

Competitive Strategy

A plan of action designed to achieve a sustainable advantage over competitors, through understanding and responding to competitive forces.

Contingency Strategy

A plan prepared to address specific unforeseen events or situations that may impact the organization.