Haven received 200 NQOs (each option gives him the right to purchase 20 shares of Barlow Corporation
Question:
Haven received 200 NQOs (each option gives him the right to purchase 20 shares of Barlow Corporation stock for $7 per share) at the time he started working for Barlow Corporation three years ago when its stock price was $7 per share. Now that Barlow’s share price is $50 per share, he intends to exercise all of his options. After acquiring the 4,000 Barlow shares with his options, he intends to hold the shares for more than one year and then sell the shares when the price reaches $75 per share.
a. What are Haven’s taxes due on the grant date, exercise date, and sale date, assuming his ordinary marginal rate is 32 percent and his long-term capital gains rate is 15 percent?
b. What are the tax consequences for Barlow Corporation resulting from Haven’s option exercise if Barlow’s marginal tax rate is 21 percent? How would it change if Barlow’s marginal rate were 0 percent?
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...
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Taxation Of Individuals And Business Entities 2019 Edition
ISBN: 9781259918391
10th Edition
Authors: Brian C. Spilker, Benjamin C. Ayers, John Robinson, Edmund Outslay, Ronald G. Worsham, John A. Barrick, Connie Weaver