Karen Receives the Right to Acquire 400 Shares of Fremont

Short Answer

Karen receives the right to acquire 400 shares of Fremont Corporation stock through the company's incentive stock option plan.The fair market value of the stock at the date of the grant is $15 and the exercise price of the option is $19 per share.The fair market value of the stock at the date of exercise is $22.At the date of exercise,the tax consequences to Karen and the Fremont Corporation are
$\begin{array}{lll}\text { Karen } & \text { Fremont } \\\text { a. } \$ 1,600 & \$ 1,600 \\\text { b. } \$ 1,600 & \$-0- \\\text { c. } \$-0- & \$-0- \\\text { d. } \$-0- & \$ 1,600\end{array}$