Individual Income Taxes
43rd Edition
ISBN: 9780357109731
Author: Hoffman
Publisher: CENGAGE LEARNING - CONSIGNMENT
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Chapter 2, Problem 35DQ
To determine
Explain the main purpose of effective tax planning.
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Yost received 300 NQOs (each option gives Yost the right to purchase 10 shares of Cutter Corporation stock for $19 per
share). At the time he started working for Cutter Corporation three years ago, Cutter's stock price was $19 per share. Yost
exercised all of his options when the share price was $38 per share. Two years after acquiring the shares, he sold them at
$59 per share.
Note: Input all amounts as positive values. Leave no answer blank. Enter zero if applicable.
d. Assume that Yost's options were exercisable at $24 and expired after five years. If the stock only reached $22 during its high point
during the five-year period, what are Yost's tax consequences on the grant date, the exercise date, and the date the shares are sold,
assuming his ordinary marginal rate is 35 percent and his long-term capital gains rate is 15 percent?
Grant date
Exercise date
Taxes Due
Sale date
Mark received 10 ISOs (each option gives him the right to purchase 14 shares of Hendricks Corporation stock for $6 per
share) at the time he started working for Hendricks Corporation five years ago, when Hendricks's stock price was $5 per
share. Now that Hendricks's share price is $35 per share, Mark intends to exercise all of his options and hold all of his
shares for more than one year. Assume that more than a year after exercise, Mark sells the stock for $35 a share.
Note: Enter all amounts as positive values. Leave no answers blank. Enter zero if applicable.
b. What are Hendricks's tax consequences on the grant date, the exercise date, and the date Mark sells the shares?
Grant date
Exercise date
Sale date
Tax Benefit
Yost received 300 NQOs (each option gives Yost the right to purchase 10 shares of Cutter Corporation stock for $19 per
share). At the time he started working for Cutter Corporation three years ago, Cutter's stock price was $19 per share. Yost
exercised all of his options when the share price was $38 per share. Two years after acquiring the shares, he sold them at
$59 per share.
Note: Input all amounts as positive values. Leave no answer blank. Enter zero if applicable.
c. Assume that Yost is "cash poor" and needs to engage in a same-day sale in order to buy his shares. Due to his belief that the stock
price is going to increase significantly, he wants to maintain as many shares as possible. How many shares must he sell in order to
cover his purchase price and taxes payable on the exercise?
Number of shares to be sold
Chapter 2 Solutions
Individual Income Taxes
Ch. 2 - A large part of tax research consists of...Ch. 2 - Why do taxpayers often have more than one...Ch. 2 - Prob. 3DQCh. 2 - Prob. 4DQCh. 2 - Prob. 5DQCh. 2 - Prob. 6DQCh. 2 - Rank the following items from the lowest to...Ch. 2 - Prob. 8DQCh. 2 - Prob. 9DQCh. 2 - Prob. 10DQ
Ch. 2 - Prob. 11DQCh. 2 - Prob. 12DQCh. 2 - Sanjay receives a 90-day letter after his...Ch. 2 - Prob. 14DQCh. 2 - Prob. 15DQCh. 2 - Prob. 16DQCh. 2 - Prob. 17DQCh. 2 - Prob. 18DQCh. 2 - Prob. 19DQCh. 2 - Prob. 20DQCh. 2 - Prob. 21DQCh. 2 - Prob. 22DQCh. 2 - Prob. 23DQCh. 2 - Prob. 24DQCh. 2 - Prob. 25DQCh. 2 - Prob. 26DQCh. 2 - Prob. 27DQCh. 2 - Prob. 28DQCh. 2 - Prob. 29DQCh. 2 - Prob. 30DQCh. 2 - Prob. 31DQCh. 2 - For her tax class, Yvonne must prepare a research...Ch. 2 - Prob. 33DQCh. 2 - Prob. 34DQCh. 2 - Prob. 35DQCh. 2 - Prob. 36DQCh. 2 - Prob. 37PCh. 2 - Prob. 38PCh. 2 - Prob. 39PCh. 2 - Prob. 40PCh. 2 - Prob. 41PCh. 2 - Using the legend provided, classify each of the...Ch. 2 - Prob. 43PCh. 2 - Prob. 1RPCh. 2 - Prob. 2RPCh. 2 - When Oprah gave away Pontiac G6 sedans to her TV...Ch. 2 - Prob. 4RPCh. 2 - (1) Go to taxalmanac.org, and use the website to...
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