Question

On January 1, year 1, Dave received 2,200 shares of restricted stock from his employer, RRK Corporation. On that date, the stock price was $18 per share. On receiving the restricted stock, Dave made the 83(b) election. Dave’s restricted shares will vest at the end of year 2. He intends to hold the shares until the end of year 4 when he intends to sell them to help fund the purchase of a new home. Dave predicts the share price of RRK will be $29 per share when his shares vest and will be $56 per share when he sells them. Assume that Dave’s price predictions are correct and answer the following questions: (Leave no answers blank. Enter zero if applicable. Round your final answer to the nearest whole dollar value. Enter all amounts as positive values.)

rev: 12_13_2018_QC_CS-151658

Problem 12-34 Part a

a. If Dave’s stock price predictions are correct, What are Dave’s taxes due if his ordinary marginal rate is 32 percent and his long-term capital gains rate is 15 percent?

b. If Dave’s stock price predictions are correct, What are the tax consequences of these transactions to RRK if its marginal rate is 21 percent?

Answer 1

Dave tan Consequnca, oM thma nt dale a) ir that a wii 672, hich ballaa Expanahon income Ca pay tanus Descniption an Amoun Shaner acqired 19.00 FHV rant date Ondinany Trant $396o0 (a)x(2) Income n date 32% Tar Ret S Tar due (3) x ) 126 72 OM dates Vat hvesting ddeinc h madu th83 () dlection. Dave wu tax O nJe ho OM Dava l cal aulatad kade which\0 ON Erplanin Amout Deoeiption Amamt Realized $23200 $29600 Line (3) abova. Adjuted barin (G)-) $83600 Long -term Caprtal

Prafenanhal Mail Tan Rte Tax due th ohon 8)x(a) $12540 shanes nold