In a dynamic labor market for quality executive talent, are parachute payments necessary or do they simply invite abuse and provide a benefit for an exclusive few at the expense of other employees who may get fewer benefits or the corporation's customers who may pay a higher price for the products or services of the corporation?

Management, Loose-Leaf Version
13th Edition
ISBN:9781305969308
Author:Richard L. Daft
Publisher:Richard L. Daft
Chapter12: Managing Human Talent
Section: Chapter Questions
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In a dynamic labor market for quality executive talent,
are parachute payments necessary or do they simply
invite abuse and provide a benefit for an exclusive few
at the expense of other employees who may get fewer
benefits or the corporation's customers who may pay a
higher price for the products or services of the
corporation?
• Executive I. M. Best is covered under his company's
ISO plan. The plan grants Best an option in 2015 to
purchase company stock for $150 per share. In
February 2017, Best exercises this option and
purchases 100 shares. Fair market value of the 100
shares in February 2017 is $20,000. Suppose Best
sells the 100 shares in December 2017 for $25,000.
A. What is Best's taxable gain?
B. How much is treated as compensation income in
2017?
C. How much is treated as capital gain?
Transcribed Image Text:In a dynamic labor market for quality executive talent, are parachute payments necessary or do they simply invite abuse and provide a benefit for an exclusive few at the expense of other employees who may get fewer benefits or the corporation's customers who may pay a higher price for the products or services of the corporation? • Executive I. M. Best is covered under his company's ISO plan. The plan grants Best an option in 2015 to purchase company stock for $150 per share. In February 2017, Best exercises this option and purchases 100 shares. Fair market value of the 100 shares in February 2017 is $20,000. Suppose Best sells the 100 shares in December 2017 for $25,000. A. What is Best's taxable gain? B. How much is treated as compensation income in 2017? C. How much is treated as capital gain?
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