Martin Corporation Granted a Nonqualified Stock Option to Employee Caroline

question 7

Multiple Choice

Martin Corporation granted a nonqualified 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 1,000 shares of Martin stock.The option itself does not have a readily ascertainable FMV.Caroline exercised the option on August 1,2013 when the stock's FMV was $250.Caroline sells the stock on September 5,2014 for $300 per share.Martin Corporation will be allowed a deduction of

• A)$150,000 in 2011.
• B)$100,000 in 2013.
• C)$50,000 in 2014.
• D)$100,000 in 2013 and $50,000 in 2014.

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Definitions:

Explain

To make something clear or easy to understand by describing or giving information about it.

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To provide valid reasons or evidence to support an argument or action.

Claim

A statement made about something, usually without providing evidence or proof, often requiring verification.

Adjustment

The process of making minor changes to improve or correct a situation or mechanism.