This year, Gogo Inc. granted a nonqualified stock option to Mrs. Mill to buy 10,000 shares of Gogo stock for $8 per share for five years. At date of grant, Gogo stock was selling on a regional securities market for $7.87 per share. Gogo recorded $26,700 compensation expense for the estimated value of the option. Five years after Gogo granted the option to Mrs. Mill, she exercised it on a day when Gogo stock was selling for $10.31 per share. 1. How much income must Mrs. Mill recognize this year? 2. Can Gogo deduct the $26,700 expense on this years tax return? 3. How much income must Mrs. Mill recognize in the year of exercise? 4. What is Gogos tax deduction in the year of exercise?