ACC 330 HW ch 12 Questions and
Answers
Cammie received 100 NQOs (each option provides a right to purchase 10 shares of
MNL stock for $10 per share) at the time she started working for MNL Corporation
(5/1/Y1) four years ago when MNL's stock price was $8 per share. Now that MNL's
stock price is $40 per share (8/15/Y5), she intends to exercise all of her options. After
acquiring the 1,000 MNL shares with her options, she held the shares for over one year
(10/1/Y6) and sold them at $60 per share.
a. What are Cammie's taxes due on the grant date (5/1/Y1), exercise date (8/15/Y5),
and sale date (10/1/Y6), assuming her ordinary marginal rate is 32 percent and her
long-term capital gains rate is 15 percent? - answer tax on grant date: 0
tax on exercise date: 9600
tax on sale date: 3000
Cammie received 100 NQOs (each option provides a right to purchase 10 shares of
MNL stock for $10 per share) at the time she started working for MNL Corporation
(5/1/Y1) four years ago when MNL's stock price was $8 per share. Now that MNL's
stock price is $40 per share (8/15/Y5), she intends to exercise all of her options. After
acquiring the 1,000 MNL shares with her options, she held the shares for over one year
(10/1/Y6) and sold them at $60 per share.
b. What are MNL Corporation's tax savings on the grant date (5/1/Y1), exercise date
(8/15/Y5), and sale date (10/1/Y6)? - answer tax on grant date: 0
tax savings on exercise date:
tax savings on sale date: 0
Gray's employer is now offering group-term life insurance. The company will provide
each employee with $100,000 of group-term life insurance. It costs Gray's employer
$300 to provide this amount of insurance to Gray each year.Assuming that Gray is 52
years old, determine the monthly premium that Gray must include in gross income as a
result of receiving the group-term life insurance benefit. - answer monthly premium:
11.50
(100,000-50,000)/1000 x .23
LaMont works for a company in downtown Chicago. The company encourages
employees to use public transportation (to save the environment) by providing them with
transit passes at a cost of $292 per month.
If LaMont receives one pass (worth $292) each month, how much of this benefit must
he include in his gross income each year? - answer 324
Answers
Cammie received 100 NQOs (each option provides a right to purchase 10 shares of
MNL stock for $10 per share) at the time she started working for MNL Corporation
(5/1/Y1) four years ago when MNL's stock price was $8 per share. Now that MNL's
stock price is $40 per share (8/15/Y5), she intends to exercise all of her options. After
acquiring the 1,000 MNL shares with her options, she held the shares for over one year
(10/1/Y6) and sold them at $60 per share.
a. What are Cammie's taxes due on the grant date (5/1/Y1), exercise date (8/15/Y5),
and sale date (10/1/Y6), assuming her ordinary marginal rate is 32 percent and her
long-term capital gains rate is 15 percent? - answer tax on grant date: 0
tax on exercise date: 9600
tax on sale date: 3000
Cammie received 100 NQOs (each option provides a right to purchase 10 shares of
MNL stock for $10 per share) at the time she started working for MNL Corporation
(5/1/Y1) four years ago when MNL's stock price was $8 per share. Now that MNL's
stock price is $40 per share (8/15/Y5), she intends to exercise all of her options. After
acquiring the 1,000 MNL shares with her options, she held the shares for over one year
(10/1/Y6) and sold them at $60 per share.
b. What are MNL Corporation's tax savings on the grant date (5/1/Y1), exercise date
(8/15/Y5), and sale date (10/1/Y6)? - answer tax on grant date: 0
tax savings on exercise date:
tax savings on sale date: 0
Gray's employer is now offering group-term life insurance. The company will provide
each employee with $100,000 of group-term life insurance. It costs Gray's employer
$300 to provide this amount of insurance to Gray each year.Assuming that Gray is 52
years old, determine the monthly premium that Gray must include in gross income as a
result of receiving the group-term life insurance benefit. - answer monthly premium:
11.50
(100,000-50,000)/1000 x .23
LaMont works for a company in downtown Chicago. The company encourages
employees to use public transportation (to save the environment) by providing them with
transit passes at a cost of $292 per month.
If LaMont receives one pass (worth $292) each month, how much of this benefit must
he include in his gross income each year? - answer 324
