Martin Corporation granted a nonqualified stock option to employee Caroline on January 1,2011.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 1,2013 when the stock's FMV was $250.Caroline sells the stock on September 5,2014 for $300 per share.Martin Corporation will be allowed a deduction of

Question

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Martin Corporation can take a deduction in the year the employee exercises the option. The deduction is equal to the difference between the FMV of the stock at the time of exercise and the option price, multiplied by the number of shares. In this case, ($250 - $150) * 1,000 = $100,000 in 2013.

Martin Corporation Granted a Nonqualified Stock Option to Employee Caroline