In January 2017, Khors Company issued nonqualified stock options to its CEO, Jenny Svaro. Because the company did not expect Ms. Svaro to leave the company, the options vest at the time they are granted with a total value of $50,000. In December of 2018, the company experienced a surge in its stock price, and Ms. Svaro exercised the options. The total bargain element at the time of exercise was $60,000. For 2018, what is the book-tax difference due to the options exercised?

Question

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For financial purposes, the company deducts the entire $50,000 value of the stock options in 2017, when the stock option is granted. For tax purposes, the company deducts the $60,000 bargain element in 2018, when the stock option is exercised. For 2018, the book-tax difference is favorable in the amount of $60,000.

In January 2017, Khors Company Issued Nonqualified Stock Options to Its