Mirasol Corporation granted an incentive stock option to employee Josephine two years ago.The option price was $150 and the FMV of the Mirasol stock was also $150 on the grant date.The option allowed Josephine to purchase 160 shares of Mirasol stock.Josephine exercised the option this year when the stock's FMV was $250.Unless otherwise stated,assume Josephine is a qualifying employee.The results of the above transactions to Mirasol Corporation will be
A)no compensation deduction.
B)a compensation deduction of $16,000 on the grant date.
C)an alternative minimum tax adjustment item of $16,000 on the exercise date.
D)a compensation deduction of $16,000 on the exercise date.

Question

Quizplus · Accepted Answer

Incentive stock options (ISOs) do not provide a compensation deduction to the employer (Mirasol Corporation) when the employee exercises the option. The tax benefit is realized by the employee, not the employer.

Mirasol Corporation Granted an Incentive Stock Option to Employee Josephine