Rosa exercises ISOs for 100 shares of Copper Corporation common stock at the option price of $100

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Rosa exercises ISOs for 100 shares of Copper Corporation common stock at the option price of $100 per share on May 21, 2016, when the fair market value is $120 per share. She sells the 100 shares of common stock three and one-half years later for $140.
a. Calculate the long-term capital gain and the ordinary income on the sale.
b. Assume that Rosa holds the stock only seven months and sells the shares for $140 per share. Calculate the capital gain and ordinary income on the sale.
c. In (b), what amount can Copper Corporation deduct? When?
d. Assume instead that Rosa holds the stock for two years and sells the shares for $115 per share. Calculate any capital gain and ordinary income on this transaction.
e. In (a), assume that the options are nonqualified stock options with a nonascertainable fair market value on the date of the grant. Calculate the long-term capital gain and ordinary income on the date of the sale.
f. In (e), assume that each option has an ascertainable fair market value of $10 on the date of the grant and that no substantial risk of forfeiture exists. Calculate the long-term capital gain and the ordinary income on the date of the sale.
Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on...
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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South Western Federal Taxation Individual Income Taxes 2017

ISBN: 9781305873988

40th Edition

Authors: William H. Hoffman, David M. Maloney, William A. Raabe, James C. Young, Nellen

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