Question

[Q14+15] On January 1, year 1, Dave received 2,500 shares of restricted stock from his employer, RRK Corporation. On that date, the stock price was $13 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 $33 per share when his shares vest and will be $54 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.)

a. What are Dave’s taxes due if his ordinary marginal rate is 32 percent and his long-term capital gains rate is 15 percent

Grant date	???
Vesting date	0
Sale date	???

b. If Dave’s stock price predictions are correct, What are the tax consequences of these transactions to RRK?

Grant date	???
Vesting date	0
Sale date	0

Answer 1

Answer & 7 on the grant date, receipt of shares by Dave in year 1 = texable x ordinary marginal . =(25:00 x $13)x327 32500X3a. = 10400 - No Taxes arise on vesting Dale son sede date, the capital gains are taxable. soi . capital gains = sales proceeds – cost of acquisition :-(a,soo x sy) - (a,soox 13) 135,000 32500 = 102500 Tas due = capital gains x 150). = 102,500 215.) = 15375

10400 Grant date vesting date. sale datu 15,375 6 *- RRk will have to pay faces on the stock granted to Dare! Since, In this case, does not provide the rate. So, assume its 35%. Tax due on grant date = (asoo x 13 ) x 35%, = 32500 X354 = 11375 - BRK Corporation gets no benefit on the vesting date or when Dave sells the shares. Hence, no tax due on these transactions. 11,375 Gwant date vestiydati sale dati L