Mr Fat Cat has decided to use the proceeds from the exercise of his SAR's of SCAT stock (Snacks 4 Cats, Inc) to help fund the exercise of his NQSOs. Mr Fat Cat received these options on January 5,2020, with an exercise price equal to the FMV at the date of the grant of $10. He then exercised the options on January 15, 2022, when the FMV of the stock was $50 and sold the stock on January 1, 2023 for $55. Which of the following statements are true? 1 At the date of the grant, Mr Fat Cat will have ordinary income of $10. 2. At the date of exercise, Mr Fat Cat wil havea positive AMT adjustmentof $40.

3. At the date of sale, Mr Fat Cat will have short term capital gain of $5.

4. Snacks 4Cats, Inc (the employer) will have adeductible expense in relation to this option of $50/share.

A. 1, 2, 3, and 4. B. 1, 2, and 3.

C. 3 a n d 4.

D. 3 only