In 2011, BT granted a non-qualified stock option to Ms. P to buy 500 shares of BT

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In 2011, BT granted a non-qualified stock option to Ms. P to buy 500 shares of BT stock at $20 per share for five years. At date of grant, BT stock was trading on Nasdaq for $18.62 per share. In 2016, Ms. P exercised the option when BT’s stock was trading at $31.40 per share.
a. How much income did Ms. P recognize in 2011 and 2016 because of the stock option?

b. Compute Ms. P’s basis in the 500 shares.
c. What are the tax consequences of the stock option to BT in 2011 and 2016?

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Principles Of Taxation For Business And Investment Planning 2017

ISBN: 9781259753015

20th Edition

Authors: Sally M. Jones, Shelley C. Rhoades Catanach, Sandra R. Callaghan

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