Question

Which of the following describes the correct treatment of incentive stock options (ISOs)?

A. Financial accounting—no expense; tax—no deduction.
B. Financial accounting—no expense; tax—deduct bargain element at exercise.
C. Financial—expense value over vesting period; tax—no deduction.
D. Financial—expense value over vesting period; tax—deduct bargain element at exercise.

Answer 1

Incentive stock options (ISOs) are not expensed on the financial statements and do not have any tax deductions.

Step-by-step explanation:

The correct treatment of incentive stock options (ISOs) is described as follows:

Financial accounting: ISOs are not expensed on the financial statements.

Tax: ISOs do not have any tax deductions.