This year, Gogo, Inc. granted a nonqualified stock option to Mwana 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 $26,70 compensation expense for the estimated value of the option.

A. How much income must Mwana recognize this year?

B. Can Gogo deduct the $26,700 expense on this year's tax return?

C. Assuming a 21 percent tax rate, compute Gogo's deferred tax asset or deferred tax liability (identify which) resulting from the $26,700 compensation expense.