Deborah, who is employed by Rogers Public Co. Ltd., was granted an option in year one to purchase up to 10,000 common shares at $14 after completion of her fifth year of employment. The FMV of the common shares at the time of granting the right was $12. She does not have any other shares. During Deborah's seventh year of employment, she decided to exercise part of her right and purchased 5,000 shares with a FMV of $15 as at that date. Three years later, Deborah sold the shares for $25 per share. What are the tax implications of each of the above transactions on: a) The date of grant of the options b) The date the option is exercised c) The date the shares are sold

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Deborah, who is employed by Rogers Public Co. Ltd., was granted an option in year one to purchase up
to 10,000 common shares at $14 after completion of her fifth year of employment. The FMV of the
common shares at the time of granting the right was $12. She does not have any other shares.
During Deborah's seventh year of employment, she decided to exercise part of her right and purchased
5,000 shares with a FMV of $15 as at that date.
Three years later, Deborah sold the shares for $25 per share.
What are the tax implications of each of the above transactions on:
a) The date of grant of the options
b) The date the option is exercised
c) The date the shares are sold
Transcribed Image Text:Deborah, who is employed by Rogers Public Co. Ltd., was granted an option in year one to purchase up to 10,000 common shares at $14 after completion of her fifth year of employment. The FMV of the common shares at the time of granting the right was $12. She does not have any other shares. During Deborah's seventh year of employment, she decided to exercise part of her right and purchased 5,000 shares with a FMV of $15 as at that date. Three years later, Deborah sold the shares for $25 per share. What are the tax implications of each of the above transactions on: a) The date of grant of the options b) The date the option is exercised c) The date the shares are sold
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