Final answer:
The book-tax difference for June Inc. in 2018 will be $6,000. This is calculated by subtracting the book expense recognized ($4,000) from the tax deduction available ($10,000) due to the bargain element on the exercised stock options.
Step-by-step explanation:
The question pertains to the book-tax difference related to nonqualified stock options (NQSOs) exercised by an employee of June Inc. When these options are granted and later exercised, they create differences in book and tax reporting due to the varying rules under Generally Accepted Accounting Principles (GAAP) and the Internal Revenue Code (IRC).
According to GAAP, the expense related to stock options is recorded at the time the options are granted based on their fair value. In this case, the total value at grant date being $4,000. This expense will be recognized over the vesting period. On the exercise date, the book entry would have already recognized the expense, and there would be no additional book impact.
For tax purposes, the difference comes at exercise when the bargain element, which is the difference between the market price at exercise and the option strike price, becomes taxable. In this scenario, with a bargain element of $5 per share on 2,000 shares, June Inc. will have a taxable deduction of $10,000 (2000 shares * $5), which is different from the book expense recognized of $4,000. Thus, the book-tax difference for June Inc. for the year 2018 will be $6,000 ($10,000 tax deduction - $4,000 book expense).