IN 2015, Byron was granted 3,000 stock options by his employer, Buxton Corporation. The options vested after one of employment and must be exercised within 10 years from the grant date. Each option allowed Byron to purchase one share of Buxton Corporation stock for $10 per share. On the date the options were granted to Byron, Buxton Corporation stock was selling for $10 per share. In 2018, when Buxton Corporation stock was selling for $30 per share, Byron exercised all his options and purchased 3,000 shares of Buxton Corporation. In 2021, Byron sold all 3,000 shares in Buxton Corporation stock for $42 per Share Assume Byron’s capital gain tax rate is 20%, ordinary income marginal tax rate is 37%, and Byron’s employer is a C-Corporation (21% tax rate) A)What are the federal income tax consequences to Byron and Buxton Corporation in 2015, 2018, and 2021 if the Buxton Corporation options granted to Byron were nonqualified stock options (NQSOs)? You may ignore alternative minimum tax (AMT) for this question. Please show your work and explain your calculations B) What are the federal income tax consequences to Byron and Buxton Corporation in 2015, 2018, and 2021 if the Buxton Corporation options granted to Byron were qualified incentive stock options (ISOs)? You may ignore alternative minimum tax (AMT) for this question. Please show your work and explain your calculations
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IN 2015, Byron was granted 3,000 stock options by his employer, Buxton Corporation. The options vested after one of employment and must be exercised within 10 years from the grant date. Each option allowed Byron to purchase one share of Buxton Corporation stock for $10 per share. On the date the options were granted to Byron, Buxton Corporation stock was selling for $10 per share. In 2018, when Buxton Corporation stock was selling for $30 per share, Byron exercised all his options and purchased 3,000 shares of Buxton Corporation. In 2021, Byron sold all 3,000 shares in Buxton Corporation stock for $42 per Share
Assume Byron’s
and Byron’s employer is a C-Corporation (21% tax rate)
A)What are the federal income tax consequences to Byron and Buxton Corporation in 2015, 2018, and 2021 if the Buxton Corporation options granted to Byron were nonqualified stock options (NQSOs)? You may ignore alternative minimum tax (AMT) for this question. Please show your work and explain your calculations
B) What are the federal income tax consequences to Byron and Buxton Corporation in 2015, 2018, and 2021 if the Buxton Corporation options granted to Byron were qualified incentive stock options (ISOs)? You may ignore alternative minimum tax (AMT) for this question. Please show your work and explain your calculations
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