Rick Recently Received 500 Shares of Restricted Stock from His

question 114

Essay

Rick recently received 500 shares of restricted stock from his employer, Crazy Corporation, when the share price was $5 per share. Rick's restricted shares vested three years later, when the market price was $12. Rick held the shares for a little more than a year after vesting and sold them when the market price was $15. What is the amount of Rick's compensation income if Rick made an election under section 83(b)when the stock was granted? Assuming a marginal tax rate of 35 percent, what is the amount of Rick's ordinary income amount and tax liability at the time of the income inclusion?

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Definitions:

Incurred Expense

An expense that has been recognized in the accounting period in which it is incurred, regardless of when the payment is made.

Total Liabilities

The sum of all financial debts or obligations a company owes, shown on the balance sheet.

Expense Account

An account where business-related expenses are recorded, often used for tracking purposes for budgeting or tax deductions.

Incurred

Expenses, losses, or liabilities that have been suffered or assumed in the course of conducting business.