Mirasol Corporation granted an incentive stock option to employee Josephine two years ago. The option price was $150 and the FMV of the Mirasol stock was also $150 on the grant date. The option allowed Josephine to purchase 160 shares of Mirasol stock. Josephine exercised the option this year when the stock's FMV was $250. Unless otherwise stated, assume Josephine is a qualifying employee. The results of the above transactions to Mirasol Corporation will be
A. no compensation deduction.
B. an alternative minimum tax adjustment item of $16,000 on the exercise date.
C. a compensation deduction of $16,000 on the grant date.
D. a compensation deduction of $16,000 on the exercise date.
Answer: A
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