Edna is a well-paid executive with ADley, a firm that uses stock options and deferred compensation as well as high salaries, to compensate its most successful employees. When Edna and Ron were divorced, Ron got the rights to a bundle of these deferred compensation rights. Complete the following table, indicating the required tax results.

Transcribed Image Text:

Option Tax Market Price for Edna's Transferred Year to Ron Event 2004 $ 9 Divorce settlement Tax Consequences to Edna Tax Consequences to Ron 2007 $14 Ron exercises 2010 $20 2012 $22 options with $10 cash payment, then holds stock received. Edna terminates employment with ADley; $100 lump sum of deferred compensation is distributed to Ron. Ron sells shares received via option contracts.