Santini's new contract for 2015 indicates the following compensation and benefits: Benefit Description Amount Salary..............................................$130,000 Health insurance......................................9,000

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Santini's new contract for 2015 indicates the following compensation and benefits:
Benefit Description Amount
Salary..............................................$130,000
Health insurance......................................9,000
Restricted stock grant...............................2,500
Bonus..................................................5,000
Hawaii trip............................................4,000
Group-term life insurance...........................1,600
Parking ($275 per month)...........................3,300
Santini is 54 years old at the end of 2015. He is single and has no dependents. Assume that the employer matches $1 for $1 for the first $6,000 that the employee contributes to his 401(k) during the year. The 100 ISOs each allow the purchase of 10 shares of stock at a strike price of $5 (also the market price on the date of grant). The ISOs vest in two years when the stock price is expected to be $15 and Santini expects to sell the shares in three years when the market price is $20. The restricted stock grant is 500 shares granted when the market price was $5 per share. Assume that the stock vests on December 31, 2015, and that the market price on that date is $7.50 per share. Also assume that Santini is willing to make any elections to reduce equity-based compensation taxes. The Hawaii trip was given to him as the outstanding sales person for 2014. The group-term life policy gives him $150,000 of coverage. Assume that Santini does not itemize deductions for the year. Determine Santini's taxable income and income tax liability for 2015.
Strike Price
In finance, the strike price of an option is the fixed price at which the owner of the option can buy, or sell, the underlying security or commodity.
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Taxation Of Individuals And Business Entities 2016

ISBN: 9781259334870

7th Edition

Authors: Brian Spilker, Benjamin Ayers, John Robinson, Edmund Outslay, Ronald Worsham, John Barrick, Connie Weaver

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