Which of the Following Statements Regarding Incentive Stock Options (Isos)is
Which of the following statements regarding incentive stock options (ISOs)is false?
A)ISOs that vest solely create permanent book-tax differences.
B)For ISOs, book-tax differences are always unfavorable.
C)For books, the initial estimated value of the ISOs is expensed pro rata over the vesting period.
D)Book-tax differences associated with ISOs may be either permanent or temporary.
Orange Inc.issued 20,000 nonqualified stock options valued at $40,000 (in total)on December 31, 2018.The options vest entirely on December 31, 2019.The options were all exercised in 2019 with a bargain element on each option of $3.What is the 2019 book-tax difference associated with the stock options?
E)None of the choices are correct.
On December 31, 2018, Khors Company issued nonqualified stock options to its CEO.The options fully vest on December 31, 2019, and the options were valued at $50,000 on the grant date.Ms.Svaro exercised the options on December 31, 2019.The total bargain element at the time of exercise was $40,000.For 2019, what is the nature of the book-tax difference due to the options exercised?
A)Favorable and temporary.
B)Favorable and permanent.
C)Unfavorable and temporary.
D)Unfavorable and permanent.
E)Not enough information to determine.
Which of the following statements regarding capital gains and losses is false?
A)In terms of tax treatment, corporations generally prefer capital gains to ordinary income.
B)Like individuals, corporations can deduct $3,000 of net capital losses against ordinary income in a given year.
C)Corporations can carry back net capital losses three years and they can carry them forward for five years.
D)Corporations must apply capital loss carrybacks and carryovers in a particular order.