Carmelo, an Employee of the Rondo Corporation, Is Granted an Option

question 54

Multiple Choice

Carmelo, an employee of the Rondo Corporation, is granted an option to acquire 400 shares of the company's stock under its nonqualified stock option plan. Which of the following are correct statements?
I.If the option has a readily ascertainable fair market value, Carmelo must report income equal to the fair market value of the option times the number of shares granted (i.e., 400 shares) .
II.If the option does not have a readily ascertainable fair market value Carmelo will not report any income at the date of grant.
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• A)Only statement I is correct.
• B)Only statement II is correct.
• C)Both statements are correct.
• D)Neither statement is correct.