South-Western Federal Taxation 2019: Individual Income Taxes (Intuit ProConnect Tax Online 2017 & RIA Checkpoint 1 term (6 months) Printed Access Card)
South-Western Federal Taxation 2019: Individual Income Taxes (Intuit ProConnect Tax Online 2017 & RIA Checkpoint 1 term (6 months) Printed Access Card)
42nd Edition
ISBN: 9781337702546
Author: James C. Young, William H. Hoffman, William A. Raabe, David M. Maloney, Annette Nellen
Publisher: Cengage Learning
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Chapter 7, Problem 13DQ
To determine

Find out the relevant tax issues for Person K.

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On October 30, 2015, Tess bought 500 shares of ACTS stock for 640 pesos per share. On November 15, 2016, ACTS paid a 620 pesos dividend per share, and on January 15, 2017, she sold the stock for 677 pesos per share. Did Tess gain or lose on the investment? How much money did she gain or lose in the investment? (with complete solutions)
Cindy works for Sky Manufacturers, a public corporation. In 2010, she was offered an option to purchase Sky Manufacturers shares at $35 per share from her employer (Sky Manufacturers). The fair market value of Sky Manufacturers stock on that day was $35 per share. The option had a four year exercise time limit. Cindy exercised her option in 2011 at which time she purchased 500 shares. The fair market value of Sky Manufacturers stock at that time was $52 per share. In 2014, Cindy sold these 500 shares for $60 per share. a. What is the effect of this option on Cindy’s taxable income in 2010? b. What is the effect on Cindy’s taxable income of her exercising the option in 2011, assuming she takes advantage of all possible tax options. c. What is the effect on Cindy’s taxable income of her selling the stock in 2014. d. How would your answers change if the value of the shares at the date of grant was $40 per share?
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