Bell Corporation grants an incentive stock option to Peggy, an employee, on January 1, 2017, when the
Question:
Bell Corporation grants an incentive stock option to Peggy, an employee, on January 1, 2017, when the option price and FMV of the Bell stock is $80. The option entitles Peggy to buy 10 shares of Bell stock. Peggy exercises the option and acquires the stock on April 1, 2019, when the stock’s FMV is $100. Peggy, while still employed by the Bell Corporation, sells the stock on May 1, 2021, for $120 per share.
a. What are the tax consequences to Peggy and Bell Corporation on the following dates: January 1, 2017; April 1, 2019; and May 1, 2021? (Assume all incentive stock option qualification requirements are met.)
b. How would your answer to Part a change if Peggy instead sold the Bell stock for $130 per share on May 1, 2019?
CorporationA 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...
Step by Step Answer:
a January 1 2017 no effect since no tax consequences occur on the grant of an incentive stock option ...View the full answer
Federal Taxation 2018 Comprehensive
ISBN: 9780134532387
31st Edition
Authors: Thomas R. Pope, Timothy J. Rupert, Kenneth E. Anderson
