Martin Corporation granted a nonqualified stock option to employee Caroline on January 1,2013.The option price was $150,and the FMV of the Martin stock was also $150 on the grant date.The option allowed Caroline to purchase 1,000 shares of Martin stock.The option itself does not have a readily ascertainable FMV.Caroline exercised the option on August 1,2017,when the stock's FMV was $250.Caroline sells the stock on September 5,2018,for $300 per share.Martin Corporation will be allowed a deduction of
A)$150,000 in 2013.
B)$100,000 in 2017.
C)$50,000 in 2018.
D)$100,000 in 2017 and $50,000 in 2018.

Question

Quizplus · Accepted Answer

B)The employer is allowed a deduction equal to the employee income recognized on the exercise date (i.e.the number of shares times the spread between the FMV at exercise and the exercise price).

Martin Corporation Granted a Nonqualified Stock Option to Employee Caroline