Hunter is a single 45-year-old who is employed by an engineering firm that includes a diverse array of taxable and nontaxable fringe benefits within the overall compensation package it offers its employees. Employees receive a base salary in addition to occasional incentive awards (i.e. bonuses); the incentive awards are often in the form of noncash perks. The company also offers different forms of equity-based compensation to reward its highest performing employees. Hunter does not itemize deductions, and he does not have any available tax credits or estimated tax payments. His employer withheld $23,668 from his paychecks for income tax withholding. Hunter's base salary for calendar-year 2018 was $101,350. He embarked on an all-expenses-paid 5-day Caribbean cruise in April 2018, which he received from his employer in lieu of a cash bonus. The cruise and related travel expenses would have cost Hunter $4,025 if had paid for the trip out-of-pocket. His employer agreed to give Hunter an extra $1,375 in cash to cover his tax liability on the value of the cruise (referred to as a "tax gross-up"). Tax gross-up payments are included on an employee's paycheck as ordinary wages subject to income and payroll taxes. Hunter also took advantage of the following pre-tax payroll deductions: Annual employee contribution to employer's 401(k) qualified plan = 6% * $101,350 base salary = $6,081/year (his employer provides a 75% match as well, i.e. $4,560.75/year) Annual employee contribution to a flexible spending account ("FSA") = $2,400/year Annual employee contribution to health insurance plan = $1,440/year A summary of the above-mentioned compensation details is provided in the following table: Description Base salary Non-cash incentive award - all-expenses-paid cruise vacation Tax gross-up for the non-cash incentive award Payroll deduction - Employee 401(k) contributions Payroll deduction - Employee FSA contributions Payroll deduction - Employee portion of insurance premiums Income taxes withheld from paychecks 2018 Amount $101,350 $4,025 $1,375 $6,081 $2,400 $1,440 $23,668 Hunter is a highly-valued engineer at the company and thus has been rewarded quite handsomely the past few years with several equity-based compensation awards. In 2018 Hunter decided to sell 4,360 shares of stock that he received pursuant to the terms of these awards. Type of Equity Section 83(b) Award Election? Number of Options/Shares Granted Grant Date Vest Date FMV/Share @ Vest FMV/share @ Grant (Exercise Price) $9.50 $11.30 $11.75 Exercise FMV/Share a Number of Sales Date Exercise Shares Sold Sale Date Proceeds per Share 610 5/1/2018 $17.50 950 5/1/2018 $17.50 Restricted Stock Restricted Stock Restricted Stock Nonqualified Stock Options Yes No Yes 610 shares 950 shares 1.225 shares 100 options - 7 shares per option 1/1/2016 1/1/2017 1/1/2018 1/1/2018 1/1/2018 1/1/2019 $11.75 $11.75 $10.90 1/1/2016 $9.50 1/1/2017 $11.30 1/1/2017 $11.30 700 5/1/2018 $17.50 1/1/2017 $11.30 1/1/2018 $11.75 1/1/2018 $11.75 1,400 5/1/2018 $17.50 Nonqualified Stock Options Incentive Stock Options Incentive Stock Options 200 options - 7 shares per option 100 options - 7 shares per option 200 options - 7 shares per option 1/1/2016 $9.50 1/1/2017 $11.30 1/1/2017 $11.30 700 5/1/2018 $17.50 1/1/2017 $11.30 1/1/2018 $11.75 1/1/2018 $11.75 In addition to his base salary, incentive award and equity-based compensation, Hunter also received the following taxable AND non-taxable fringe benefits from his employer during 2018: Company's Hunter's Annual Annual Cost Cost $2,160/year $1,440/year $180/year $0 $816/year $0 Fringe Benefit Description The company offers health insurance to all employees. The monthly premium for Health each employee is $300, of which the company pays 60% and the employee pays insurance 40% via a pre-tax payroll deduction. *Hunter elected to receive health insurance coverage for 2018. Accidental death and dismemberment The company provides AD&D insurance to all employees, free-of-charge. ("AD&D") insurance The company offers a fitness facility membership to all employees, free of charge. Fitness facility The fitness facility is not located on the company's business premises and is open to membership the general public. *Hunter elected to receive a membership in the fitness facility for 2018. Employer- The company provides all engineers with a company phone, due to frequent after- provided cell hours client calls as well as the significant number of clients residing outside of the phone United States. Employees are not allowed to use their company phone to make personal calls. Basic group- The company provides group-term life insurance ($50,000 policy) to all employees, term life insurance policy free-of-charge. The company offers supplemental group-term life insurance to all employees. The Supplemental supplemental life insurance coverage employees can elect is capped at 8 times their group-term life base salary or $500,000, whichever is lower. insurance policy Hunter elected to receive the maximum allowable $500,000 in supplemental life insurance for 2018. Employer- The company provides catered lunches to all employees on Mondays and Wednesdays, free-of-charge. The meals are furnished for the convenience of the provided meals company and are provided on the company's business premises. Qualified The company provides qualified parking access at a parking garage located on the parking company's business premises to all employees, free of charge. $444/year $0 $90/year $0 $900/year $240/year $1,352/year $0 $3,900/year ($325/month) $0 What amount (if any) will Hunter's employer report as taxable wages on his 2018 Form W-2 with respect to his non-qualified stock options ("NSOs")? If Hunter does not have any 2018 taxable wages related to his NSOs, please Input o for your response (l.e. do not leave the answer blank). Please round your answer to ZERO decimal places Numeric Response During 2018, Hunter sold 2,100 shares of stock he acquired upon exercise of the related non-qualified stock options. He sold the shares for $17.50/share. Choose the option below that correctly represents Hunter's stock basis for the shares that were sold, along with the holding period of the shares. Multiple Choice 700 shares exercised 1/1/2017 Basis = 700 shares ($11.30 - $9.50) (taxable wages, aka "bargain element") = $1,260 Holding period begins on 1/1/2017 1,400 shares exercised 1/1/2018 Basis = 1.400 shares ($11.75 - $11.30) (taxable wages, aka "bargain element") = $630 Holding period begins on 1/1/2018 O 700 shares exercised 1/1/2017 Basis = 700 shares. $9.50 (exercise price) = $6.650 Holding period begins on 1/1/2017 1,400 shares exercised 1/1/2018 Basis = 1.400 shares - $11.30 (exercise price) = $15.820 Holding perlod begins on 1/1/2018 O 700 shares exercised 1/1/2017 Basis = 700 shares - $17.50 (FMV on date of sale) = $12,250 Holding period begins on 1/1/2017 1,400 shares exercised 1/1/2018 Basis = 1.400 shares - $17.50 (FMV on date of sale) = $24.500 Holding perlod begins on 17/1/2018 700 shares exercised 1/1/2017 Basis = 700 shares - $11.30 (FMV on exercise date) = $7.910 Holding period begins on 1/1/2017 1,400 shares exercised 1/1/2018 Basis = 1.400 shares $11.75 (FMV on exercise date) = $16,450 Holding period begins on 1/1/2018 Hunter is a single 45-year-old who is employed by an engineering firm that includes a diverse array of taxable and nontaxable fringe benefits within the overall compensation package it offers its employees. Employees receive a base salary in addition to occasional incentive awards (i.e. bonuses); the incentive awards are often in the form of noncash perks. The company also offers different forms of equity-based compensation to reward its highest performing employees. Hunter does not itemize deductions, and he does not have any available tax credits or estimated tax payments. His employer withheld $23,668 from his paychecks for income tax withholding. Hunter's base salary for calendar-year 2018 was $101,350. He embarked on an all-expenses-paid 5-day Caribbean cruise in April 2018, which he received from his employer in lieu of a cash bonus. The cruise and related travel expenses would have cost Hunter $4,025 if had paid for the trip out-of-pocket. His employer agreed to give Hunter an extra $1,375 in cash to cover his tax liability on the value of the cruise (referred to as a "tax gross-up"). Tax gross-up payments are included on an employee's paycheck as ordinary wages subject to income and payroll taxes. Hunter also took advantage of the following pre-tax payroll deductions: Annual employee contribution to employer's 401(k) qualified plan = 6% * $101,350 base salary = $6,081/year (his employer provides a 75% match as well, i.e. $4,560.75/year) Annual employee contribution to a flexible spending account ("FSA") = $2,400/year Annual employee contribution to health insurance plan = $1,440/year A summary of the above-mentioned compensation details is provided in the following table: Description Base salary Non-cash incentive award - all-expenses-paid cruise vacation Tax gross-up for the non-cash incentive award Payroll deduction - Employee 401(k) contributions Payroll deduction - Employee FSA contributions Payroll deduction - Employee portion of insurance premiums Income taxes withheld from paychecks 2018 Amount $101,350 $4,025 $1,375 $6,081 $2,400 $1,440 $23,668 Hunter is a highly-valued engineer at the company and thus has been rewarded quite handsomely the past few years with several equity-based compensation awards. In 2018 Hunter decided to sell 4,360 shares of stock that he received pursuant to the terms of these awards. Type of Equity Section 83(b) Award Election? Number of Options/Shares Granted Grant Date Vest Date FMV/Share @ Vest FMV/share @ Grant (Exercise Price) $9.50 $11.30 $11.75 Exercise FMV/Share a Number of Sales Date Exercise Shares Sold Sale Date Proceeds per Share 610 5/1/2018 $17.50 950 5/1/2018 $17.50 Restricted Stock Restricted Stock Restricted Stock Nonqualified Stock Options Yes No Yes 610 shares 950 shares 1.225 shares 100 options - 7 shares per option 1/1/2016 1/1/2017 1/1/2018 1/1/2018 1/1/2018 1/1/2019 $11.75 $11.75 $10.90 1/1/2016 $9.50 1/1/2017 $11.30 1/1/2017 $11.30 700 5/1/2018 $17.50 1/1/2017 $11.30 1/1/2018 $11.75 1/1/2018 $11.75 1,400 5/1/2018 $17.50 Nonqualified Stock Options Incentive Stock Options Incentive Stock Options 200 options - 7 shares per option 100 options - 7 shares per option 200 options - 7 shares per option 1/1/2016 $9.50 1/1/2017 $11.30 1/1/2017 $11.30 700 5/1/2018 $17.50 1/1/2017 $11.30 1/1/2018 $11.75 1/1/2018 $11.75 In addition to his base salary, incentive award and equity-based compensation, Hunter also received the following taxable AND non-taxable fringe benefits from his employer during 2018: Company's Hunter's Annual Annual Cost Cost $2,160/year $1,440/year $180/year $0 $816/year $0 Fringe Benefit Description The company offers health insurance to all employees. The monthly premium for Health each employee is $300, of which the company pays 60% and the employee pays insurance 40% via a pre-tax payroll deduction. *Hunter elected to receive health insurance coverage for 2018. Accidental death and dismemberment The company provides AD&D insurance to all employees, free-of-charge. ("AD&D") insurance The company offers a fitness facility membership to all employees, free of charge. Fitness facility The fitness facility is not located on the company's business premises and is open to membership the general public. *Hunter elected to receive a membership in the fitness facility for 2018. Employer- The company provides all engineers with a company phone, due to frequent after- provided cell hours client calls as well as the significant number of clients residing outside of the phone United States. Employees are not allowed to use their company phone to make personal calls. Basic group- The company provides group-term life insurance ($50,000 policy) to all employees, term life insurance policy free-of-charge. The company offers supplemental group-term life insurance to all employees. The Supplemental supplemental life insurance coverage employees can elect is capped at 8 times their group-term life base salary or $500,000, whichever is lower. insurance policy Hunter elected to receive the maximum allowable $500,000 in supplemental life insurance for 2018. Employer- The company provides catered lunches to all employees on Mondays and Wednesdays, free-of-charge. The meals are furnished for the convenience of the provided meals company and are provided on the company's business premises. Qualified The company provides qualified parking access at a parking garage located on the parking company's business premises to all employees, free of charge. $444/year $0 $90/year $0 $900/year $240/year $1,352/year $0 $3,900/year ($325/month) $0 What amount (if any) will Hunter's employer report as taxable wages on his 2018 Form W-2 with respect to his non-qualified stock options ("NSOs")? If Hunter does not have any 2018 taxable wages related to his NSOs, please Input o for your response (l.e. do not leave the answer blank). Please round your answer to ZERO decimal places Numeric Response During 2018, Hunter sold 2,100 shares of stock he acquired upon exercise of the related non-qualified stock options. He sold the shares for $17.50/share. Choose the option below that correctly represents Hunter's stock basis for the shares that were sold, along with the holding period of the shares. Multiple Choice 700 shares exercised 1/1/2017 Basis = 700 shares ($11.30 - $9.50) (taxable wages, aka "bargain element") = $1,260 Holding period begins on 1/1/2017 1,400 shares exercised 1/1/2018 Basis = 1.400 shares ($11.75 - $11.30) (taxable wages, aka "bargain element") = $630 Holding period begins on 1/1/2018 O 700 shares exercised 1/1/2017 Basis = 700 shares. $9.50 (exercise price) = $6.650 Holding period begins on 1/1/2017 1,400 shares exercised 1/1/2018 Basis = 1.400 shares - $11.30 (exercise price) = $15.820 Holding perlod begins on 1/1/2018 O 700 shares exercised 1/1/2017 Basis = 700 shares - $17.50 (FMV on date of sale) = $12,250 Holding period begins on 1/1/2017 1,400 shares exercised 1/1/2018 Basis = 1.400 shares - $17.50 (FMV on date of sale) = $24.500 Holding perlod begins on 17/1/2018 700 shares exercised 1/1/2017 Basis = 700 shares - $11.30 (FMV on exercise date) = $7.910 Holding period begins on 1/1/2017 1,400 shares exercised 1/1/2018 Basis = 1.400 shares $11.75 (FMV on exercise date) = $16,450 Holding period begins on 1/1/2018