Cammie received 100 NQOs (each option provides a right to purchase 10 shares of MNL stock for $10 per share). She started working for MNL Corporation four years ago (5/1/Y1) when MNL’s stock price was $8 per share. Now (8/15/Y5) that MNL’s stock price is $40 per share, she intends to exercise all of her options. After acquiring the 1,000 MNL shares with her stock options, she held the shares for over one year and sold (on 10/1/Y6) them at $60 per share. (Leave no answer blank. Enter zero if applicable. Input all amounts as positive values.) Problem 12-27 Part a (Static)
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?
Amount
Tax on grant date Tax on exercise date Tax on sale date 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)?
Amount
Tax on grant date Tax on exercise date Tax on sale date

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tutorconsortium115 tutorconsortium115 · Answer 1 · 2022-11-26T18:59:44+01:00

Tax on grant date is 0, Tax on exercise date is$10,500, Tax on sale date is 3000.

A.)

Average marginal rate = 30% = 0.3.

Capital gain over the long term = 15% = 0.15

100 times ten is one thousand shares.

Quantity of shares equals (quantity of shares * price per share) = (1000 * $10) = $10,000

Given that there is no income recorded, the tax liability at grant date is $0.

Shares' market worth is equal to their quantity times their market price.

(1000 * $40) = $40,000

Average income is equal to $(40,000 - 10,000) = $30,000

Tax due in the exercise year is equal to $9000 (30,000 * 30%).

(1000 * $60) equals $60,000 in sales revenue.

Gaining money (Revenue - market value of shares)

Gain in capital equals (60,000-40000) = 20000

Tax due in the year of sale: $20,000 multiplied by 15% is $3,000

B.)

35% is the marginal tax rate.

On the award date, MNL has no tax liability, thus $0

No tax As of the date of sale, liability was equal to $0.

Ordinary income multiplied by the marginal tax rate equals tax liability in the exercise date.

(30,000 * 0.35) = $10,500

To learn more about exercise date refer to:

https://brainly.com/question/18272950

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