Taxpayer X provides restricted stock to its key employees. The stock vests over a 3 year period, and 100% vests at the end of three years. For accounting purposes, the value computed for the first award was $1,000. Assume a 20% tax rate. In all of the questions below, explain your answer. 

a. At the end of year one, what DTA will be required? 

b. At the end of year two, what DTA will be required? 

c. At the end of year three, on the date that the first award vests, the fair market value of the award is $2,000. What is the impact on the income tax rate? 

d. Consider in the alternative, at the end of year three when the first award vests, the fair market value of the award is $500. What is the impact on the income tax rate?

Answer rating: 100% (QA)

a At the end of year one the Deferred Tax Asset DTA is computed based on the temporary difference be... View the full answer