LO.8 On July 1, 2008, Red Corporation sold 100 of its common shares (worth $15 per share) to one of its employees, Bob, for $5 per share. The sale was subject to Bob’s agreement to resell the shares to the corporation for $5 per share if his employment is terminated within the following four years. The shares had a value of $26 per share on July 1, 2012. He sold the shares for $30 per share on September 15, 2012. No special election under § 83

(b) was made.

a. Bob will be taxed on what amount, if any, on July 1, 2008?

b. Bob will be taxed on what amount, if any, on July 1, 2012?

c. Bob will be taxed on what amount, if any, on September 15, 2012?

d. Red Corporation will obtain what deduction, if any, in what year?

e. Assume the same facts, except that Bob makes an election under § 83(b). He will be taxed on what amounts, if any, in what years?

f. Red Corporation in

(e) will obtain what deduction, if any, in what year?

g. Suppose Bob under

(e) voluntarily terminates his employment on January 3, 2012, and goes into business for himself. Determine the tax consequences to Bob and to Red Corporation.