Mark received 17 ISOs (each option gives him the right to purchase 30 shares of
ID: 2463710 • Letter: M
Question
Mark received 17 ISOs (each option gives him the right to purchase 30 shares of Hendricks Corporation stock for $29 per share) at the time he started working for Hendricks Corporation five years ago when Hendricks’ stock price was $29 per share. Now that Hendricks’ share price is $38 per share, he intends to exercise all options and hold all of his shares for more than one year. Assume that more than a year after exercise, Mark sells the stock for $38 a share. (Round your answers to the nearest whole dollar amount. Enter all amounts as positive values. Leave no answers blank. Enter zero if applicable.)
What are Mark’s taxes due on the grant date, the exercise date, and the date he sells the shares, assuming his ordinary marginal rate is 30 percent and his long-term capital gains rate is 15 percent?
Explanation / Answer
1./
MARK RECOGNISE $4590 ORDINARY INCOME AND PAYS $1377 TAX IN THE YEAR OF EXERCISE.
2./
MARK ALSO RECOGNISE $4590 LONGTERM CAPITAL GAIN AND PAYS $688.5 TAX ON DATE SALE.
SHARES ACCQUIRED (17 * 30) 510 EXERCISE PRICE $29 CASH NEEDED TO EXERCISE PRICE (510 * $29) $14790 MARKET PRICE $38 MARKET VALUE OF SHARE (510 * $38) $19380 BARGAIN ELEMENT (ORDINARY INCOME) $4590 ($19380 - $14790) MARGINAL TAX RATE 30% TAX DUE IN YEAR OF EXERCISE $1377 ($4590 * 30%)Related Questions
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