On January 22, 2017, Dalton Corporation granted Kathleen an option to acquire 1,500 shares of the company's stock for $7 per share. The fair market price of the stock on the date of grant was $13. The stock requires that Kathleen remain with the company for one year after the date of exercise. The option did not have a readily ascertainable fair market value. Kathleen exercises the option on August 10, 2018, when the fair market value of the stock is $17. She makes a Section 83 (b) election at the exercise date. On August 10, 2019, the fair market value of the stock is $23 per share. How much must she report as income in 2018 and 2019?
2018 2019
A. $-0- $15,000
B. $-0- $24,000
C. $10,500 $4,500
D. $15,000 $-0-
Answer: D
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