Pratt is ready to graduate and leave College Park. His future employer (Ferndale Corp.) offers the following four compensation packages from which Pratt may choose. Pratt will start working for Ferndale on January 1, year 1.

Benefit Description Option 1 Option 2 Option 3 Option 4 Salary $ 60,000 $ 50,000 $ 45,000 $ 45,000 Health insurance No coverage $ 5,000 $ 5,000 $ 5,000 Restricted stock 0 0 1,000 shares 0 NQO's 0 0 0 100 options

Assume that the restricted stock is 1,000 shares that trade at $5 per share on the grant date (January 1, year 1); shares are expected to be worth $10 per share on the vesting date at the end of year 1; and no 83(b) election is made. Assume that the NQOs (100 options) each allow the employee to purchase 10 shares at $5 exercise price. The stock trades at $5 per share on the grant date (January 1, year 1) and is expected to be worth $10 per share on the vesting date at the end of year 1, and the options are exercised and sold at the end of the year. Also assume that Pratt spends on average $3,000 on health-related costs that will be covered by insurance if he had coverage or is an after-tax expense if he isn't covered by insurance (treat this as a cash outflow).Assume that Pratt's marginal tax rate is 35 percent. (Ignore FICA taxes and time value of money considerations).

Assuming Pratt chooses Option 3 and sells the stock on the vesting date (on the last day of year 1), complete Pratt's Form 8949 for the sale of the restricted stock.

F0... 8949 Sales and Other Dispositions of Capital Assets MB\""545'" > Go to www.irs.gov/Form8949 for instructions and the latest information. 2 1 8 Department of the Treasury _ _ _ _ _ Attachment Internal Revenue Service > Frle With your Schedule D to list your transactions for lrnes 1b, 2, 3, 8b, 9, and 10 of Schedule D. Sequence N_ 1 2A Name(s) shown on return Social security number or taxpayer identication number Before you check Box A, B, or C below, see whether you received any Form(s) 1099-B or substitute statement(s) from your broker. A substitute statement will have the same information as Form 1099-B. Either will show whether your basis (usually your cost) was reported to the IRS by your broker and may even tell you which box to check. IEII Short-Term. Transactions involving capital assets you held 1 year or less are generally short-term (see instructions). For long-term transactions, see page 2. Note: You may aggregate all shortterm transactions reported on Form(s) 1099B showing basis was reported to the IRS and for which no adjustments or codes are required. Enter the totals directly on Schedule D, line 1a; you aren't required to report these transactions on Form 8949 (see instructions). You must check Box A, B, or C below. Check only one box. If more than one box applies for your short-term transactions, complete a separate Form 8949, page 1, for each applicable box. If you have more short-term transactions than will fit on this page for one or more of the boxes, complete as many forms with the same box checked as you need. I: (A) Short-term transactions reported on Form(s) 1099-B showing basis was reported to the IRS (see Note above) I: (B) Short-term transactions reported on Form(s) 1099-B showing basis wasn't reported to the IRS I: (C) Short-term transactions not reported to you on Form 1099-B Adjustment, if any, to gain or loss. 1 (e) If you enter an amount in column (9), (h) ( ) (b) (c) (d) Cost or other basis. enter a code In column lfi- Gain or (loss). Descriptionaof property Date acquired Date sold or Proceeds See the Note below 399\"\" separate IHSh'UCtlons- Subtract column (e) disposed of (sales price) and see Column (e) from column (d) and (Mo., day, yr.) (see instructions) in the separate (9) combine the result instructions _ _ Amount of with column (9) rnstructlons adjustment (Example: 100 sh. XYZ Co.) (Mo., day, yr.) (b) Cost or other basis. enter a code in column (1). Gain or (loss) (a) (c) (d) Description of property Date acquired Date sold or Proceeds See the Note below See the separate instructions. Subtract column (e) (Example: 100 sh. XYZ Co.) (Mo., day, yr.) disposed of (sales price) and see Column (e) from column (d) and (Mo., day, yr.) (see instructions) in the separate (f) instructions Code(s) from (g) combine the result Amount of instructions with column (g) adjustment 2 Totals. Add the amounts in columns (d), (e), (9), and (h) (subtractbroker and may even tell you which box to check. IEIII Long-Term. Transactions involving capital assets you held more than 1 year are generally longterm (see instructions). For short-term transactions, see page 1. Note: You may aggregate all long-term transactions reported on Form(s) 1099B showing basis was reported to the IRS and for which no adjustments or codes are required. Enter the totals directly on Schedule D, line 8a; you aren't required to report these transactions on Form 8949 (see instructions). You must check Box D, E, or F below. Check only one box. If more than one box applies for your long-term transactions, complete a separate Form 8949, page 2, for each applicable box. If you have more long-term transactions than will fit on this page for one or more of the boxes, complete as many forms with the same box checked as you need. I: (D) Long-term transactions reported on Form(s) 1099-B showing basis was reported to the IRS (see Note above) I: (E) Long-term transactions reported on Form(s) 1099-B showing basis wasn't reported to the IRS I: (F) Long-term transactions not reported to you on Form 1099-3 Adjustment, if any, to gain or loss. 1 (e) If you enter an amount in column (9), (h) (a) (b) (c) (d) Cost or other basis. 39:21:67 a 001:\" 99:");9 Gain or (loss). . . . Date sold or Proceeds See the Note below 3 5393 e '\" ru '"5- Subtract column (e) (EEaerzcrIE-tacg'ofhpwgrgo) Bate acgqurrerd) disposed of (sales price) and see Column (e) from column (d) and p ' ' ' " y, y ' (Mo., day, yr.) (see instructions) in the separate (f) (9) combine the result instructions Code(s) from Amount of with column (9) instructions adjustment Instructions Amount of instructions with column (9) adjustment 2 Totals. Add the amounts in columns (d), (e), (9), and (h) (subtract negative amounts). Enter each total here and include on your Schedule D, line 8b (if Box D above is checked), line 9 (if Box E above is checked), or line 10 (if Box F above is checked)