This year, Gogo Inc. granted a non qualified 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.

a. How much income must Mrs. Mill 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.

Assume the taxable year is 2018.