Final answer:
When a corporation reports book compensation expense for incentive stock options, it creates a positive book-tax difference.
Step-by-step explanation:
When a corporation reports book compensation expense for incentive stock options, it creates a positive book-tax difference.
A positive book-tax difference means that the expense reported in the corporation's financial statements is greater than the expense recognized for tax purposes. This difference creates a deferred tax asset on the corporation's balance sheet.
The correct answer is d. deferred, as the book compensation expense for incentive stock options creates a timing difference between the book and tax records, which is reconciled in later years.
When a corporation reports book compensation expense for incentive stock options, it creates a deferred book-tax difference. The correct answer to the student's question is d. deferred. This is because the expense recognized for accounting purposes does not immediately affect the taxes paid by the company. Instead, the tax consequences are realized when the options are exercised, potentially resulting in different timing for tax reporting purposes compared to book reporting. Hence, the book compensation expense reported will result in a deferred book-tax difference that will be reconciled in future fiscal years.