Question

On January 1, year 1, Dave received 1,000 shares of restricted stock from his employer, RRK Corporation. On that date, the stock price was $7 per share. Dave’s restricted shares will vest at the end of year 2. He intends to hold the shares until the end of year 4, when he intends to sell them to help fund the purchase of a new home. Dave predicts the share price of RRK will be $30 per share when his shares vest and will be $40 per share when he sells them. (Leave no answer blank. Enter zero if applicable. Input all amounts as positive values.)

b. If Dave’s stock price predictions are correct, what are the tax consequences of these transactions to RRK?

Tax Benefit

Grant date $0

Vesting date

Sale date

Answer 1

a)

Calculations of Tax Consequence on Grant Date -

Calculations of Tax Consequence on Sale Date -

Note - Dave will owe no tax on vesting date as he elected sec 83(b)......

b)

Calculations of Tax Consequence on Vesting Date -

Note-

No Tax Benefit on Grant date and Sell Date.