eBook

Problem $12-34($Algorithmic$)($LO$.3)$

In $2023,$ Reya exercised an incentive stock option that had been granted to her in $2020$ by her employer, Weather Corporation. Reya acquired $100$ shares of Weather stock for the option price of $$7,800$ per share. The rights in the stock become freely transferable and not subject to a substantial risk of forfeiture in $2023.$ The fair market value of the stock at the date of exercise was $$10,100$ per share. Reya sells the stock for $$11,900$ per share later in $2025.$

If an amount is zero, enter $"0".$

a$.$ What is the amount of Reya's AMT adjustment in $2023?$ What is her recognized gain on the sale for regular tax and for AMT purposes in $2025?$

In $2023,$ Reya has a $$ AMT adjustment of $ $.$ Her recognized gain on the sale for regular income tax is: $$ and $ $$

$$ AMT adjustment of $ $x$ in $2025.$

Feedback

Check My Work

Incentive stock options $($ISOs$)$ are granted by employers to help attract new personnel and retain those already employed. At the time an ISO is granted, the employer corporation sets an option price for the corporate stock. If the value of the stock increases during the option period, the employee can obtain stock at a favorable pricefby exercising the option.

b$.$ How would your answers in $($a$)$ change if Reya had sold the stock in $2023$ rather than $2025?$

Reya has a $ $$ AMT adjustment in $2023.$ For regular tax purposes, Reya would recognize $ $$ of ordinary$/$compensation income and a & $$ short$-$term capital gain.

Feedbac