a Canadian Controlled Private Corporation receives an option to purchase 1000 of her employer’s common shares at $20 per share in July, 2019. At this time, the fair market value of the stock is $19 per share. In March 2020, when the fair market value is $26 per share, she exercises the option and immediately sells the shares. By what amount do thes

a Canadian Controlled Private Corporation receives an option to purchase 1000 of her employer’s common shares at $20 per share in July, 2019. At this time, the fair market value of the stock is $19 per share. In March 2020, when the fair market value is $26 per share, she exercises the option and immediately sells the shares. By what amount do thes

Individual Income Taxes

43rd Edition

ISBN:9780357109731

Author:Hoffman

Publisher:Hoffman

Chapter12: Alternative Minimum Tax

Section: Chapter Questions

Problem 20CE: In March 2019, Serengeti exercised an ISO that had been granted by his employer, Thunder...

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In March 2019, Serengeti exercised an ISO that had been granted by his employer, Thunder Corporation, in December 2016. Serengeti acquired 5,000 shares of Thunder stock for the exercise price of 65 per share. The fair market value of the stock at the date of exercise was 90 per share. What is Serengetis 2016 AMT adjustment related to the ISO? What is the 2019 adjustment?
On May 9, 2019, Glenna purchases 500 shares of Ignaz Company stock for 7,500. On June 30, 2019, she writes a call option on the stock, giving the grantee the right to buy the stock for 9,000 during the following 12-month period. Glenna receives a call premium of 750 for writing the call. The call is exercised by the grantee on December 15, 2019. a. What is the amount and character of Glennas gain or loss? b. Assume that the original option expired unexercised. What is the amount and character of Glennas gain or loss?
Freda is a cash basis taxpayer. In 2019, she negotiated her salary for 2020. Her employer offered to pay her 21,000 per month in 2020 for a total of 252,000. Freda countered that she would accept 10,000 each month for the 12 months in 2020 and the remaining 132,000 in January 2021. The employer accepted Fredas terms for 2020 and 2021. a. Did Freda actually or constructively receive 252,000 in 2020? b. What could explain Fredas willingness to spread her salary over a longer period of time? c. In December 2020, after Freda had earned the right to collect the 132,000 in 2020, the employer offered 133,000 to Freda at that time, rather than 132,000 in January 2021. The employer wanted to make the early payment so as to deduct the expense in 2020. Freda rejected the employers offer. Was Freda in constructive receipt of the income in 2020? Explain.
On April 5, 2017, Gustavo was granted an NQSO for 200 shares of common stock at 50 per share. On the date of the grant, there was no readily ascertainable fair market value for the option. Gustavo exercised the options on March 31, 2018, when the stock was selling for 60 per share. He sold the shares on December 1, 2019, for 75 per share. a. What amount and type of income, if any, will Gustavo have on the exercise date? b. What amount and type of income, if any, will Gustavo have on the date of the sale?
On July 20,2019, Kelli purchases office equipment at a cost of $12,000. Kelli elects out of bonus depreciation but makes the election to expense for 2019. She is selfemployed as an attorney, and, in 2019, her business has a net income of $6,000 before considering this election to expense. Kelli has no other income or expenses for the year. What is the maximum amount that Kelli may deduct for 2019 under the election to expense, assuming she elects to expense the entire $12,000 purchase? $24,000 $12,000 $6,000 $3,000 $1,000
Marlene, a cash basis taxpayer, invests in Series EE U.S. government savings bonds and bank certificates of deposit (CDs). Determine the tax consequences of the following on her 2019 gross income: a. On September 30, 2019, she cashed in Series EE bonds for 10,000. She purchased the bonds in 2009 for 7,090. The yield to maturity on the bonds was 3.5%. b. On July 1, 2018, she purchased a CD for 10,000. The CD matures on June 30, 2020, and will pay 10,816, thus yielding a 4% annual return. c. On July 1, 2019, she purchased a CD for 10,000. The maturity date on the CD was June 30, 2020, when Marlene would receive 10,300.
Determine the taxpayers adjusted basis in each of the following situations. If any changes are made in the original basis of the asset, explain why they are necessary. a. Simone purchases 300 shares of Wilguess, Inc., stock in 2017 for 6,300. In 2017 and 2018, Wilguess pays cash dividends of 2 per share. In 2019, Wilguess pays a 40 percent stock dividend (nontaxable), and Simone receives an additional 120 shares of stock. b. Symbol Corporation purchases a building in 2016 at a cost of 240,000. Annual maintenance costs on the building are 80,000. In 2018, Symbol adds a wing to the building at a cost of 60,000. In 2019, the building is painted at a cost of 25,000. Symbol deducts 4,800 in depreciation in 2016, 7,300 in 2017, and 8,100 in 2018 and 2019. c. Lorissa purchases land as an investment in 2017 for 33,000. Property taxes on the property are 400 per year. In 2018, Lorissa is assessed 2,000 by the county assessor for her share of a sidewalk that the county builds adjacent to the land. Lorissa pays the assessment in 2019. d. The Barton Brothers Partnership purchases a computer in 2017 for 8,000. The partnership elects to deduct the entire cost of the computer in 2017. In 2019, Barton Brothers spends 300 to repair the computer.
You have worked at a Canadian controlled private corporation for 5 years. Three years ago your employer granted you options to acquire 4,000 shares for $54 per share when the shares had a fair value of $40 per share. In February 2019, you exercise all of the options when the fair value was $82 a share. In May 2020, you sell the 4,000 shares for $97 a share. What is the income tax impact for you in 2019 and 2020? Document calculations of Net Income (Division B) and Taxable Income (Division C) for both 2019 and 2020.
You are an employee of a Canadian public corporation. On February 1, 2019 you received options to purchase 5,000 shares of your employer's common stock at a price of $75 per share. You exercised the options and purchased 5,000 shares on March 1, 2019. You sold all of the shares on June 1, 2020. The market price of her employer's common stock was $74 per share on February 1, 2019; $79 per share on March 1, 2019 and $85 per share on June 1, 2020. Hint: Net Income is Division B and Taxable Income is Division C. Part one –show calculations) The effect on your 2019 tax return is: A) increase in Net Income for Tax Purposes of $12,500; increase in Taxable Income of $12,500. B) increase in Net Income for Tax Purposes of $25,000; increase in Taxable Income of $12,500. C) increase in Net Income for Tax Purposes of $10,000; increase in Taxable Income of $10,000. D) increase in Net Income for Tax Purposes of $20,000; increase in Taxable Income of $10,000. Part two – show…
On December 28, 2020, Kramer sells 150 shares of Lavender, Inc. stock for $77,000. On January 10, 2021, he purchases 100 shares of the same stock for $82,000. a. Assuming that Kramer's adjusted basis for the stock sold is $65,000, what is his recognized gain or loss? Kramer's recognized _______ is $_________. What is his basis for the new shares? His basis for the new shares is $________. b. Assuming that Kramer's adjusted basis for the stock sold is $89,000, what is his recognized gain or loss? Kramer's recognized _______ is $_________. What is his basis for the new shares? His basis for the new shares is $________. c. Advise Kramer on how he can avoid any negative tax consequences encountered in part (b). He could repurchase _________.
Nadine bought 100 shares of pie stock for 15$ on March 1.2030. On august 21,2021 she noticed stock has increased in value to 25$ a share. She decided to sell all her shares. Nadine’s only othe income for the year 68000 from wages. She will use the single filing status. Nadine’s revenue from the sale of stock will increase her taxable income by
At the start of the 2019 tax year, Franny had $40,000 trading stock on hand in her café. Throughout the year she bought a further $150,000 worth of trading stock and recorded sales of $280,000. On 30 June 2019, she had trading stock on hand valued at $50,000. What is Franny’s Taxable Income for the 2019 financial year? Select one: a. $280,000 b. $200,000 c. $140,000 d. $130,000