RP2. Stock purchased by an employee

William B. Good became an employee of GOODIE Co. Inc., Inc., a privately held firm. On January 15, 2017, William B. Good was allowed to buy 20,000 shares of GOODIE Co. Inc. stock for $40,000 dollars. When William B. Good bought the stock, each share was worth $2. GOODIE Co. Inc. retained the right to repurchase each share for $2 original purchase price if William B. Good leaves GOODIE Co. Inc. at any time during the next two years for any reason. GOODIE Co. Inc. stock increased to $5 per share in January 15, 2019 when the two year restriction ended. William B. Good sold the stock on September 30, 2019 for $9 per share, after the announcement of a new patent by GOODIE Co. Inc.. Advise William B. Good roughly how much tax she must pay and for what year(s). Assume William B. Good is in the 35% tax bracket for ordinary income and 15% for long term capital gains.

Thoroughly research the above situation and prepare a detailed Tax File Memorandum to support your research, findings, conclusion, and application to Mr. Good.

Advise Mr. Good by a detailed Client Letter of your findings and conclusion.