Jackson Corporation Granted an Incentive Stock Option to Employee Caroline

Multiple Choice

Jackson Corporation granted an incentive stock option to employee Caroline on January 1,two years ago.The option price was $150,and the FMV of the Jackson stock was also $150 on the grant date.The option allowed Caroline to purchase 160 shares of Jackson stock.Caroline exercised the option on August 1,2013,when the stock's FMV was $250.Unless otherwise stated,assume Caroline is a qualifying employee.If Caroline sells the stock on July 5,2014 for $400 per share,she must recognize

A) long-term capital gain of $40,000 in the year of sale.
B) long-term capital gain of $24,000 in the year of sale.
C) ordinary income of $16,000 on the exercise date and a long-term capital gain of $24,000 in the year of sale.
D) ordinary income of $16,000 and a short-term capital gain of $24,000 in the year of sale.