Slugger Jones is the CEO of Diamond Baseball Equipment, Inc. (Diamond). It is a rapidly growing publicly traded company. Slugger was awarded the following stock options from his company

Option Grant	Grant Date	Type	Exercise Price	# Shares
A	February 1, Year 1	ISO	$20	100
B	July 1, Year 2	NQSO	$25	100
C	August 1, Year 3	ISO	$30	100
D	May 1, Year 4	NQSO	$30	100

During Year 5, Slugger had the following transactions regarding the above stock options: 

Option Grant	Date	Action	# Shares	Market Price on Action Date
A	February 1	Exercised	100	$42
A	February 1	Sold	100	$42
B	February 14	Exercised	100	$45
C	February 14	Exercised	100	$45
D	May 1	Exercised	100	$50
D	June 1	Sold	100	$60

Note: before answering these questions it can help to draw out a timeline. 

1. How much income would Slugger have when his ISOs are granted?
2. What are the tax implications for the A options during Year 5?
3. What are the tax implications for the B options during Year 5?
4. What are the tax implications for the C options during Year 5?
5. What are the tax implications for the D options during Year 5?
6. 
   
7. Over the last five years, Slugger's salary has increased from $450,000 to $900,000 and his annual bonus has increased to $400,000 as the market value of the company has increased. What are some of the tax implications for the company and for Slugger?

Answer rating: 100% (QA)

Income from ISOs Grant Option A ISOs Incentive Stock Options do not create taxable income upon grant Therefore when the ISOs are granted Slugger doesn... View the full answer