South-Western Federal Taxation 2019: Individual Income Taxes (Intuit ProConnect Tax Online 2017 & RIA Checkpoint 1 term (6 months) Printed Access Card)
South-Western Federal Taxation 2019: Individual Income Taxes (Intuit ProConnect Tax Online 2017 & RIA Checkpoint 1 term (6 months) Printed Access Card)
42nd Edition
ISBN: 9781337702546
Author: James C. Young, William H. Hoffman, William A. Raabe, David M. Maloney, Annette Nellen
Publisher: Cengage Learning
Question
Book Icon
Chapter 19, Problem 53P

a.

To determine

Compute the long-term capital gain and the ordinary income on the sale.

a.

Expert Solution
Check Mark

Explanation of Solution

Compute the amount of long-term capital gains:

Long-termcapitalgains=Numbershares×(SellingpriceIssueprice)=100shares×($140$100)=$4,000

The amount of ordinary income is $0.

b.

To determine

Compute the long-term capital gain and the ordinary income on the sale by assuming that Person R holds the stock only seven months and sells the shares for $140 per share.

b.

Expert Solution
Check Mark

Explanation of Solution

Compute the amount of ordinary income:

Ordinaryincome=Numbershares×(FairmarketvalueIssueprice)=100shares×($120$100)=$2,000

 The amount of Ordinary income is $2,000 (the spread), in addition to $2,000(1) STCG.

Working note:

(1) Compute the amount of Short-term capital gains:

Short-termcapital gains=Number ofshares×(SellingpriceFairmarketvalue)=100shares×($140$120)=$2,000

c.

To determine

Calculate the amount that can be deducted by Corporation C in part (b).

c.

Expert Solution
Check Mark

Explanation of Solution

The same amount that Person R realized as ordinary income ($2,000) and at the same time might be deducted by Corporation C.

d.

To determine

Compute the long-term capital gain and the ordinary income on the sale by assuming that Person R holds the stock only seven months and sells the shares for $115 per share.

d.

Expert Solution
Check Mark

Explanation of Solution

Compute the amount of long-term capital gains:

Long-termcapital gains=Number ofshares×(SellingpriceIssueprice)=100shares×($115$100)=$1,500

The amount of ordinary income is $0.

e.

To determine

Compute the amount of long-term capital gain and ordinary gain on the date of the sale by assuming that the options are non-qualified stock options with a non-ascertainable fair market value in the date of the grant.

e.

Expert Solution
Check Mark

Explanation of Solution

Compute the amount of long-term capital gains:

Long-termcapital gains=Number ofshares×(SellingpriceFairmarketvalue)=100shares×($140$120)=$2,000

The amount of LTCG is $2,000 and Person S also realizes ordinary income of [100 shares ×($120$100)] $2,000 on the exercise date.

f.

To determine

Compute the amount of long-term capital gain and ordinary gain on the date of the sale by assuming that the options has an ascertainable fair market value of $10 on the date of the grant.

f.

Expert Solution
Check Mark

Explanation of Solution

Compute the amount of long-term capital gains:

Long-termcapitalgains=Numbershares×(SellingpriceFairmarketvalue)=100shares×($140$110)=$3,000

The amount of LTCG is $3,000 and Person S also realizes ordinary income of [100 shares×$10] $1,000 on the date of exercise.

Note: $100=$100+$10

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!
Students have asked these similar questions
Do companies maintain two sets of depreciation schedules, one for financial reporting and the other one for tax purposes?
none ??
Need help with this accounting questions
Knowledge Booster
Background pattern image
Similar questions
SEE MORE QUESTIONS
Recommended textbooks for you
Text book image
Individual Income Taxes
Accounting
ISBN:9780357109731
Author:Hoffman
Publisher:CENGAGE LEARNING - CONSIGNMENT
Text book image
SWFT Individual Income Taxes
Accounting
ISBN:9780357391365
Author:YOUNG
Publisher:Cengage
Text book image
SWFT Comprehensive Volume 2019
Accounting
ISBN:9780357233306
Author:Maloney
Publisher:Cengage
Text book image
SWFT Comprehensive Vol 2020
Accounting
ISBN:9780357391723
Author:Maloney
Publisher:Cengage
Text book image
CONCEPTS IN FED.TAX., 2020-W/ACCESS
Accounting
ISBN:9780357110362
Author:Murphy
Publisher:CENGAGE L
Text book image
SWFT Essntl Tax Individ/Bus Entities 2020
Accounting
ISBN:9780357391266
Author:Nellen
Publisher:Cengage