What is piper tax treatment of the option

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Reference no: EM132809304

Piper works for Moon Co., which is a public corporation. Piper was granted a stock option in 2018 to purchase shares at $15 per share from the company when the fair market value was $17 per share. Piper exercised the option in 2020 and purchased 500 shares. The fair market value at that time was $21 per share. What is Piper's tax treatment of this option for the 2020 tax year?

Option 1:
$3,000 taxable benefit and no security option deduction

Option 2: $3,000 taxable benefit and a 50% security option deduction

Option 3: $1,000 taxable benefit and a 50% security option deduction

Option 4: $1,000 taxable benefit and no security option deduction

Reference no: EM132809304

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