Ruby Corporation Grants Stock Options to Iris on February 1,2012

question 53

Essay

Ruby Corporation grants stock options to Iris on February 1,2012.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 1,2013,when the stock's FMV is $150.Iris sells the stock on December 5,2014 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 2012,2013 and 2014 under the following assumptions:
a.The stock option is an incentive stock option.
b.The stock option is a nonqualified stock option.

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Definitions:

Learned Helplessness

A condition in which a person suffers from a sense of powerlessness, arising from a traumatic event or persistent failure to succeed, leading to a belief that one's actions have no effect on the environment.

Learned Optimism

The concept that optimism can be cultivated by changing negative thought patterns, thereby improving one's outlook on life and resilience to stress.

Hostility Component

A facet of aggression or anger that involves feelings of antagonism and the desire to harm or oppose others.

Aggressive Personality

This refers to a type of personality characterized by a predisposition towards aggressive behaviors and thoughts, often resulting in confrontations or conflicts with others.