very simple question. a paragraph each would do
THIS WILL TAKE ABOUT 1/2 A PAGE SO $5 AND NO MORE
AND I EXPECT IT IN AN HOUR. IF YOU CANT DELIVER PLEASE DONT MSG ME
Peter
Press is in charge of manufacturing for MM and the CEO wants to make
sure Peter is fully committed to MM. To do that, on April 22, 2014, MM
granted Peter a nonqualified stock option (NSO) for 10,000 shares of MM
stock with an exercise price of $5/share, which was the fair market
value of the stock on that date. The option is exercisable any time over
the next five years starting with the date of grant. If the option is
exercised before April 22, 2017, Peter has to work until April 22, 2017
to vest in the stock. Assume the option does not have a readily
ascertainable fair market value on April 22, 2014, the date of grant.
1.If
Peter exercises the option immediately upon grant, what are the tax
consequences to Peter and MM on the date of exercise? If a deduction is
involved, what does MM have to do to make sure it gets the deduction?
2.Assume
the same facts as question 1. What are the tax consequences to Peter
and MM on the date of vesting April 22, 2017 if the stock is worth $15 a
share? If a deduction is involved, what does MM have to do to make sure
it gets the deduction?
3.Assume
the same facts as question 1. Is there anything Peter could have done
to get a different tax result on April 22, 2017? If so, what would he
have had to do? How would this have changed the tax consequences to him
and MM on April 22, 2014 and April 22,2017?
4.What
if instead of exercising the option immediately, Peter waited until
April 15, 2018 to exercise the option when the stock had a FMV of $22?
What would be the tax consequences to Peter and MM on April 15, 2018?
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