Question

In 2011, Brian was granted 4,000 stock options by his employer, Dozier Corporation. The options must be exercised within 8 years from the grant date. Each option allowed Brian to purchase one share of Dozier Corporation stock for $12 per share. On the date the options were granted to Brian in 2011, Dozier Corporation stock was selling for $12 per share. In 2016, when Dozier Corporation stock was selling for $23 per share, Brian exercised his options and purchased 4,000 shares of Dozier Corporation. In 2018, Brian sold all 4,000 shares in Dozier Corporation stock for $39 per share.

A.What are the federal income tax consequences to Brian and Dozier Corporation in 2011, 2016, and 2018 if the Dozier Corporation options granted to Brian were nonqualified stock options (NQSOs)? You may ignore alternative minimum tax (AMT) for this question. Please show your work and explain your calculations. (4 points)

b. What are the federal income tax consequences to Brian and Dozier Corporation in 2011, 2016, and 2018 if the Dozier Corporation options granted to Brian were qualified incentive stock options (ISOs)? You may ignore alternative minimum tax (AMT) for this question. Please show your work and explain your calculations. (4 points).

Answer 1

SAto lock options lo Aałn toilh in &Years. Griven dhta mantin eviod Markt mite on 2011 = 바 per share Hum at non ealfed Stotk optiant cs S Scanned with CamScanner

anlo, 2 Youn tand in I faHe lo ray-lax ongain From Evercis on YeaY 206> Tam Hirnrom1= 4000x63-12) = 360001- 0n lo 8000 unlk on gunlifed stock opfien, gain on montne p./7ol.lar4. İl Íl SulbJecl -lo tax and preferenc iimforative Mnimim Tax calubtin Cs Scanned with CamScanner

a leniile uon ever cite ualfrid stock reedaute invi coun have ra Ordirary income tax on differenu helween iusved Shares Qulired okons U suly have stock onttll sevwal years im Futore f usvally expnes ten years After ssuance ao) upon termination , cohichever comes ft CS Scanned with CamScanner