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

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Question

this is a full question and is not missing anything

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

Definition Definition Tax imposed by the government on the "gain" or increase in the value of an asset at the time of its sale by the owner. Capital gain is computed based on the purchase price and sale price of the asset. If the sale price of the asset is more than the purchase price, there is a gain on the sale of asset. A tax is imposed on such gain in accordance with the applicable tax rates at the time of sale.

Expert Solution