In 2008,Merlin Received the Right to Acquire 1,200 Shares of Noble

question 78

Multiple Choice

In 2008,Merlin received the right to acquire 1,200 shares of Noble Corporation stock through the company's incentive stock option plan at an exercise price of $17 per share.On January 4,2012,Merlin exercises the option when the fair market value of the stock is $22 per share.Which of the following is(are) correct statements?
I.Noble can deduct $6,000 as compensation expense in 2012.
II.Merlin does not recognize any income but must include $6,000 as a tax preference item in computing his alternative minimum taxable income.

• A)Only statement I is correct.
• B)Only statement II is correct.
• C)Both statements are correct.
• D)Neither statement is correct.

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Definitions:

Sternocleidomastoid

A significant muscle in the neck that is involved in the rotation and flexion of the head.

Tibialis Anterior

A muscle in the lower leg that is involved in dorsiflexion and inversion of the foot.

Biceps Femoris

A muscle of the posterior thigh involved in knee flexion and hip extension, part of the hamstrings group.

Extensor Digitorum Longus

The extensor digitorum longus is a muscle in the lower leg that helps extend the toes and dorsiflex the foot, facilitating walking and running.