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a.
Compute the long-term
a.
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Explanation of Solution
Compute the amount of long-term capital gains:
The amount of ordinary income is $0.
b.
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.
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Explanation of Solution
Compute the amount of ordinary income:
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:
c.
Calculate the amount that can be deducted by Corporation C in part (b).
c.
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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.
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.
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Explanation of Solution
Compute the amount of long-term capital gains:
The amount of ordinary income is $0.
e.
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.
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Explanation of Solution
Compute the amount of long-term capital gains:
The amount of LTCG is $2,000 and Person S also realizes ordinary income of
f.
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.
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Explanation of Solution
Compute the amount of long-term capital gains:
The amount of LTCG is $3,000 and Person S also realizes ordinary income of
Note:
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Chapter 19 Solutions
South-Western Federal Taxation 2019: Individual Income Taxes (Intuit ProConnect Tax Online 2017 & RIA Checkpoint 1 term (6 months) Printed Access Card)
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