On December 31, year 1, ABC Inc. issued 5,000 stock options with an estimated value of $10 per option. Each option entitles the owner to purchase one share of ABC stock for $25 a share (the per share price of ABC stock on December 31, year 1). Assume the options vest on December 31, year 2, and that all 5,000 stock options were exercised on the vesting date when the stock was valued at $31 per share. Identify ABC's tax deduction and book-tax difference associated with the stock options under the following alternative scenarios:
a. The stock options are incentive stock options.
b. The stock options are nonqualified stock options.