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Ruby Corporation grants stock options to Iris on February 1,2013. The options do not have a readily ascertainable value. The option price is $100,and the FMV of the Ruby stock is also $100 on the grant date.The option allows Iris to purchase 200 shares of Ruby stock.Iris exercises the option on August 1,2014,when the stock's FMV is $150. Iris sells the stock on December 5,2015 for $400. Determine the amount and character (i.e.ordinary,LTCG or STCG)of income recognized by Iris and the deduction allowed Ruby Corporation in 2013,2014 and 2015 under the following assumptions:
a.The stock option is an incentive stock option.
b.The stock option is a nonqualified stock option.
Coefficient of Correlation
The coefficient of correlation, also known as Pearson's r, measures the strength and direction of a linear relationship between two quantitative variables.
Marginal Probability
The probability of an event occurring in a probability distribution, regardless of the outcome of other variables.
Probability Distribution
A mathematical function that describes the likelihood of getting each possible value that a random variable can assume.
Car Sales
The number of automobiles sold within a specific time period.
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