Imperial Construction Inc. (IC) issued 100,000 incentive stock options (ISOs) to its employees on December 31, 2015 with an estimated value of $5.50 per option. The options vest at 25 percent per year for four years (beginning on December 31, 2016). Each option allows the holder to purchase one share of stock at $8. On December 31, 2016, employees exercised 12,500 options when IC's stock was valued at $14.72 per share. What is the amount of the book-tax difference in 2016 associated with the incentive stock options? Is it favorable or unfavorable? Is it temporary or permanent?

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The Answer of Imperial Construction Inc. (IC) issued 100,000 incentive stock options (ISOs) to its employees on December 31, 2015 with an estimated value of $5.50 per option. The options vest at 25 percent per year for four years (beginning on December 31, 2016). Each option allows the holder to purchase one share of stock at $8. On December 31, 2016, employees exercised 12,500 options when IC's stock was valued at $14.72 per share. What is the amount of the book-tax difference in 2016 associated with the incentive stock options? Is it favorable or unfavorable? Is it temporary or permanent?