On May 21,2011,Becker Corporation granted Howard an option to acquire 200 shares of the company's stock for $8 per share.The fair market price of the stock on the date of grant was $14.The option did not have a readily ascertainable fair market value.Howard exercises the option on July 7,2013,when the fair market value of the stock is $20.How much must she report as income at the date of exercise?
A)$ -0-
B)$ 1,200
C)$ 2,400
D)$ 7,200
E)$10,800

Question

Quizplus · Accepted Answer

The amount of income to be reported is the difference between the fair market value of the stock on the date of exercise ($20) and the exercise price ($8), multiplied by the number of shares exercised (200).
($20 - $8) x 200 = $2,400. Therefore, the correct answer is C.

On May 21,2011,Becker Corporation Granted Howard an Option to Acquire