Mark received 10 ISOs at the time he started working for Hendricks Corporation five years ago when

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Mark received 10 ISOs at the time he started working for Hendricks Corporation five years ago when Hendricks’s price was $5 per share (each option gives him the right to purchase 10 shares of Hendricks Corporation stock for $5 per share). Now that Hendricks’s share price is $35 per share, he intends to exercise all options and hold all of his shares for more than year. Assume that more than a year after exercise, Mark sells the stock for $35 a share.

a. What are Mark’s tax consequences on the grant date, the exercise date, and the date he sells the shares assuming his ordinary marginal rate is 32 percent and his long-term capital gains rate is 15 percent?

b. What are Hendricks’s tax consequences on these dates assuming its marginal tax rate is 21 percent?

Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...
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Taxation Of Individuals And Business Entities 2019 Edition

ISBN: 9781259918391

10th Edition

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

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