Bender Corporation grants a nonqualified stock option to Penny, an employee, on January 1, 2019, that entitled

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Bender Corporation grants a nonqualified stock option to Penny, an employee, on January 1, 2019, that entitled Penny ro acquire 1,000 shares of Bender stock at $80 per share. On this date, the stock has a $100 FMV and the option has a readily ascertainable FMV of $20 per share. Penny exercises the option on January 1, 2020 (when the FMV of the stock is $150), and acquires 1,000 shares of the stock for $80 per share. Penny later sells the Sender stock on January 1, 2022, for $200 per share.

a. What are the tax consequences to Penny and Bender Corporation on the following dates: January 1, 2019; January 1, 2020; and January 1, 2022?

b. How would your answer to Pan a change if the Bender stock were instead closely-held

and the option had no readily ascertainable FMV?

Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...

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Federal Taxation 2020 Comprehensive

ISBN: 9780135196274

33rd Edition

Authors: Timothy J. Rupert, Kenneth E. Anderson, David S. Hulse

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Question Posted: Mar 06, 2020 08:38 AM

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Bender Corporation grants a nonqualified stock option to Penny, an employee, on January 1, 2019, that entitled

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a January 1 2019 Penny recognizes ordinary income of 20000 100 80 x 1000 shares on the grant date eq...View the full answer

Federal Taxation 2020 Comprehensive

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