On January 1, 2016, American Corporation grants a stock option to Kay, an employee.

On January 1, 2016, the FMV of the American stock is $10. The option price is also $10.

The option permits Kay to purchase 1,000 shares of American stock.

On June 30, 2018, Kay bought 1,000 shares, when the stock's FMV was $40. Her stock was fully vested.

On January 1, 2020, Kay sold the 1,000 shares of American stock, for $50 per share

A.) Assume this is a non-qualified stock option. How much ordinary income does Kay recognize as a result of acquiring and selling this stock?

B.) Assume this is a non-qualified stock option. How much capital gain does Kay recognize as a result of acquiring and selling this stock?

C.) Assume this is a non-qualified stock option. How much compensation expense does American Corporation deduct related to Kays stock transactions?