ABC Corporation enters into a three-year employment contract with its CEO, who is a “covered employee” as defined by IRC Section 162(m). The terms of the contract include $1 million of cash compensation to be paid annually. Additionally, 100,000 shares of non-vested restricted stock are granted in year 1 and cliff vest in two years (i.e., the restricted stock will vest and become tax deductible on the first day of year 3). The fair value of the stock on the grant date is $15 per share for a total fair value of $1.5 million. Assume the fair value of the stock remains constant and the applicable tax rate is 21%. ABC Corporation has a fiscal year end of 12/31/20.

In year 3, how would ABC Corporation account for the tax effects of awards that may be subject to the IRC Section 162(m) limitation under each of the three methods?

a) Cash First
	Total Compensation in Y3	Available Tax Deduction	Amount Disallowed
Cash Compensation
Stock Compensation
Amount of SBC DTA to reverse in Y3
*hint - tax effected
b) Stock Compensation First
	Total Compensation in Y3	Available Tax Deduction	Amount Disallowed
Cash Compensation
Stock Compensation
Amount of SBC DTA to reverse in Y3
*hint - tax effected
c) Pro Rata Allocation
	Total Compensation in Y3	Available Tax Deduction	Amount Disallowed
Cash Compensation
Stock Compensation
Amount of SBC DTA to reverse in Y3