Jackson Corporation granted an incentive stock option to employee Caroline on January 1,two years ago.The option price was $150,and the FMV of the Jackson stock was also $150 on the grant date.The option allowed Caroline to purchase 160 shares of Jackson stock.Caroline exercised the option on August 1,2013,when the stock's FMV was $250.Unless otherwise stated,assume Caroline is a qualifying employee.If Caroline sells the stock on July 5,2014 for $400 per share,she must recognize
A)long-term capital gain of $40,000 in the year of sale.
B)long-term capital gain of $24,000 in the year of sale.
C)ordinary income of $16,000 on the exercise date and a long-term capital gain of $24,000 in the year of sale.
D)ordinary income of $16,000 and a short-term capital gain of $24,000 in the year of sale.

Question

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The Answer of Jackson Corporation granted an incentive stock option to employee Caroline on January 1,two years ago.The option price was $150,and the FMV of the Jackson stock was also $150 on the grant date.The option allowed Caroline to purchase 160 shares of Jackson stock.Caroline exercised the option on August 1,2013,when the stock's FMV was $250.Unless otherwise stated,assume Caroline is a qualifying employee.If Caroline sells the stock on July 5,2014 for $400 per share,she must recognize
A)long-term capital gain of $40,000 in the year of sale.
B)long-term capital gain of $24,000 in the year of sale.
C)ordinary income of $16,000 on the exercise date and a long-term capital gain of $24,000 in the year of sale.
D)ordinary income of $16,000 and a short-term capital gain of $24,000 in the year of sale.

Jackson Corporation Granted an Incentive Stock Option to Employee Caroline