In 2009, Merlin Received the Right to Acquire 1,200 Shares

Multiple Choice

In 2009, Merlin received the right to acquire 1,200 shares of Noble Corporation stock through the company's incentive stock option plan at an exercise price of $17 per share. On January 4, 2014, Merlin exercises the option when the fair market value of the stock is $22 per share. Which of the following isare) correct statements? I. Noble can deduct $6,000 as compensation expense in 2014. II. Merlin does not recognize any income but must include $6,000 as a tax preference item in computing his alternative minimum taxable income.

A) Only statement I is correct.
B) Only statement II is correct.
C) Both statements are correct.
D) Neither statement is correct.