In 2017, Royce Lewis was granted 500 stock options by his employer, Buxton Corporation. The options vest after one year of employment and must be exercised within ten years from the grant date. Each option allowed Royce Lewis to purchase one share of Buxton Corporation stock for $12 per share. Buxton Corporation stock was selling for $12 per share on the date the options were granted. In 2020, when Buxton Corporation stock was selling for $25 per share, Royce Lewis exercised all his options and purchased 500 shares of Buxton Corporation. In 2023, Royce Lewis sold all 500 shares in Buxton Corporation stock for $39 per share. Assume Royce Lewis marginal tax rate is 37%, and his long-term capital gain rate is 20%. Buxton Corporation is a C-Corporation and has a tax rate of 21%.

a. What are the federal income tax consequences to Royce Lewis and Buxton Corporation in 2017, 2020, and 2023 if the options granted to Royce Lewis were nonqualified stock options (NQSOs)? Please show your work and explain your calculations.

b. What are the federal income tax consequences to Royce Lewis and Buxton Corporation in 2017, 2020, and 2023 if the options granted to Royce Lewis were qualified incentive stock options (ISOs)? Please show your work and explain your calculations.