Imperial Construction Incorporated (IC)issued 100,000 incentive stock options (ISOs)to its employees on January 1, 2019, with an estimated value of $5.50 per option. The options vest (accrue)at 25 percent per year for four years (beginning in 2020). Each option allows the holder to purchase one share of stock at $8. On January 1, 2021, employees exercised 12,500 options as IC's stock price reached $14.72. What is the amount of the book-tax difference in 2021 associated with the incentive stock options? Is it favorable or unfavorable? Is it temporary or permanent?

Question

Quizplus · Accepted Answer

The Answer of Imperial Construction Incorporated (IC)issued 100,000 incentive stock options (ISOs)to its employees on January 1, 2019, with an estimated value of $5.50 per option. The options vest (accrue)at 25 percent per year for four years (beginning in 2020). Each option allows the holder to purchase one share of stock at $8. On January 1, 2021, employees exercised 12,500 options as IC's stock price reached $14.72. What is the amount of the book-tax difference in 2021 associated with the incentive stock options? Is it favorable or unfavorable? Is it temporary or permanent?

Imperial Construction Incorporated (IC)issued 100,000 Incentive Stock Options (ISOs)to Its