Stock Options. Bell Corporation grants an incentive stock option to Peggy, an employee, on January 1, 2018, when the option price and FMV of the Bell stock is $80. The option entitles Peggy to buy 10 shares of Bell stock. Peggy exercises the option and acquires the stock on April 1, 2020, when the stock's FMV is $100. Peggy, while still employed by the Bell Corporation, sells the stock on May 1, 2022, for $120 per share.

a. What are the tax consequences to Peggy and Bell Corporation on the following dates:

January 1, 2018; April 1, 2020; and May 1, 2022? (Assume all incentive stock option qualification requirements are met.)

b. How would your answer to Part a change if Peggy instead sold the Bell stock for $130 per share on May 1, 2020?