Which of the following statements regarding restricted stock is false?Multiple ChoiceEven if the value of restricted stock decreases from the price on the grant date, it retains some value to employee.There are no effective tax planning elections for restricted stock.Like incentive stock options, the employee's income inclusion (the bargain element) occurs when the stock is sold.Like stock options, restricted stock has to vest before it can be sold.

Even if the value of restricted stock decreases from the price on the grant date, it retains some…

Answered: Which of the following statements…

CONCEPTS IN FED.TAX.,2020-W/ACCESS

20th Edition

ISBN:9780357110362

Author:Murphy

Publisher:Murphy

Chapter15: Choice Of Business Entity—other Considerations

Section: Chapter Questions

Problem 64P

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Which of these is not true regarding the Section 83(b) election? Multiple Choice The election freezes the value of the employee's compensation as of the grant date The election must be made within 30 days of the grant date en employee leaves before the vesting date, any loss is limited to $3,000 The election is an important tax planning tool if the stock is expected to increase in value
A corporation that transfers restricted stock to an employee as compensation may deduct the stock's fair market value in the year of transfer even if the employee doesn't recognize the value as gross income in the year of transfer. T/F also explain the reason, thanks.
How is it possible for an employee stock option to be valuable even if the firms stock price fails to meet shareholders expectations?
Many executives own shares in the companies they manage and are also in high tax brackets. When faced with the choice between declaring dividends and repurchasing shares, managers may opt to repurchase shares as it is not a taxable event for them unless they sell their shares and with fewer shares outstanding, the stock price will likely rise. The company's investors may prefer dividend payments. Glven the discussion in the introduction to the course, this is an example of what theory in action? Type your answer and submit
a controller argues that when a company issues stock for less than current value, the value of preexinting stockholders shares is diluted. Is this allowed and right at employee compensation ?
Which of the following statements concerning common stock and the investment banking process is NOT CORRECT? a. The preemptive right gives each existing common stockholder the right to purchase his or her proportionate share of a new stock issue. b. The announcement of a large issue of new stock could cause the stock price to fall. This loss is called "market pressure," and it is treated as a flotation cost because it is a cost to stockholders that is associated with the new issue. c. If a firm sells 1,000,000 new shares of Class B stock, the transaction occurs in the primary market. d. Listing a large firm's stock is often considered to be beneficial to stockholders because the increases in liquidity and reputation probably outweigh the additional costs to the firm. e. Stockholders have the right to elect the firm's directors, who in turn select the officers who manage the business. If stockholders are dissatisfied with…
The rationale behind granting stock options is toinduce employees to work harder and be moreproductive. As the stock price increases (presumably due to their hard work), the employees sharein this added wealth. Another way to share thiswealth would be to grant shares of stock ratherthan options. What are the advantages anddisadvantages of using stock options rather thanshares of stock as employee incentives?
Which of the following is NOT true? a. If the choice is cash, a liability has to be recorded until the SARS are exercised. b. Stock options will almost always have value, whereas restricted stock may not. C. An option-pricing model is not used for valuing restricted stock. d. An executive receiving restricted stock is given the stock prior to vesting.
With respect to the shareholder/manager relationship, which of the following statements is FALSE? a. The managerial salary package should include an incentive component b. Executive stock options do not have expiration dates and are held in perpetuity c. Executive stock options tend to be issued out-of-money d. Performance shares can be used to align manager/shareholder interests
a) A minority shareholder who has a drag-along right is entitled to: sell her shares to the majority shareholders at a pre-agreed price. buy the shares of the majority shareholders at a pre-agreed price. sell her shares along with and at the same terms and conditions as the majority shareholders. force other shareholders to sell their shares along with her if certain conditions are met. None of the above. b) The purpose of a negative pledge on the borrower's assets in an unsecured bank loan agreement is to ensure that the loan is senior to other loans of the borrower. ensure that the loan is subordinated to other loans of the borrower. prevent the borrower from issuing any bonds in the future. ensure that the borrower cannot subsequently take up other loans with a different lender, securing the subsequent loan with the borrower's assets. ensure that the borrower cannot subsequently lend money to other firms without insisting on collaterals to secure the loan.
Corporate shareholders generally receive less favorable tax treatment from a qualifying stock redemption than from a dividend distribution. Question 7 options: True False
Statement 1: In the case of stock options, the amount of compensation shall be the FMV of the stock options at the time of the exercise of such option. Statement 2: Upon the exercise of the stock option, additional income shall be subject to regular tax if exercised by a managerial employee. Which statement/s is/are correct? a.Statement 2 b.Both statements c.Statement 1 d. neither statement

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