MGAC50H3 Final: Final Crib Sheet

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pucelouse641

2 May 2011

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[chp 1 and 2: introduction and liability for tax] Liability of individuals for income taxes in canada. You are liable for tax in canada only if you are considered to be a resident (not a citizenship issue) The 4 types of residency: full-time resident. In order to be considered in this category, the tax payer should demonstrate a continuing state of relationship with canada. (significant ties): has a house / spouse and kids live in canada / dependants in canada. Cdn org (union or professional) / g2 / seasonal dwelling place in canada. (other ties of limited importance): retention of cdn mailing address / cdn post office box / cdn safety deposit box / business card showing cdn address / telephone listing in canada / cdn newspaper and magazine subscription. (nature of absence from canada): evidence of intention to permanently sever ties with canada / regularity and length of visits to.

Related Questions

Sarasota Company adopted a stock-option plan on November 30, 2016, that provided that 67,700 shares of $5 par value stock be designated as available for the granting of options to officers of the corporation at a price of $9 a share. The market price was $12 a share on November 30, 2017.

On January 2, 2017, options to purchase 28,600 shares were granted to president Tom Winterâ14,900 for services to be rendered in 2017 and 13,700 for services to be rendered in 2018. Also on that date, options to purchase 14,600 shares were granted to vice president Michelle Bennettâ7,300 for services to be rendered in 2017 and 7,300 for services to be rendered in 2018. The market price of the stock was $14 a share on January 2, 2017. The options were exercisable for a period of one year following the year in which the services were rendered. The fair value of the options on the grant date was $4 per option.

In 2018, neither the president nor the vice president exercised their options because the market price of the stock was below the exercise price. The market price of the stock was $8 a share on December 31, 2018, when the options for 2017 services lapsed.

On December 31, 2019, both president Winter and vice president Bennett exercised their options for 13,700 and 7,300 shares, respectively, when the market price was $16 a share.

Prepare the necessary journal entries in 2016 when the stock-option plan was adopted, in 2017 when options were granted, in 2018 when options lapsed, and in 2019 when options were exercised.

copperllama79

Yost received 390 NQOs (each option gives Yost the right to purchase 10 shares of Cutter Corporation stock for $37.5 per share) at the time he started working for Cutter Corporation three years ago. Cutterâs stock price was $37.5 per share. Yost exercises all of his options when the share price is $48.5 per share. Two years after acquiring the shares, he sold them at $69.5 per share. (Input all amounts as positive values. Leave no answer blank. Enter zero if applicable.)

a. What are Yostâs taxes due on the grant date, exercise date, and sale date, assuming his ordinary marginal rate is 35 percent and his long-term capital gains rate is 15 percent?

income amount taxes due

grant date

exercise date

sale date

b. What are Cutter Corporationâs tax consequences (amount of deduction and tax savings from deduction) on the grant date, the exercise date, and the date Yost sells the shares, assuming its marginal tax rate is 25 percent?

income amount taxes due

grant date

exercise date

sale date

c. Assume that Yost is âcash poorâ and needs to engage in a same-day sale in order to buy his shares. Due to his belief that the stock price is going to increase significantly, he wants to maintain as many shares as possible. How many shares must he sell in order to cover his purchase price and taxes payable on the exercise? (Round your final answer to the nearest whole number.)
number of shares to be sold____

d. Assume that Yostâs options were exercisable at $42.5 and expired after five years. If the stock only reached $18 dollars during its high point during the five-year period, what are Yostâs tax consequences on the grant date, the exercise date, and the date the shares are sold, assuming his ordinary marginal rate is 35 percent and his long-term capital gains rate is 15 percent?

income amount taxes due

grant date

exercise date

sale date

violettortoise131

Walters Audio Visual, Inc., offers a stock option plan to its regional managers. On January 1, 2016, options were granted for 40 million $1 par common shares. The exercise price is the market price on the grant date, $8 per share. Options cannot be exercised prior to January 1, 2018, and expire December 31, 2022. The fair value of the options, estimated by an appropriate option pricing model, is $2 per option. Because the plan does not qualify as an incentive plan, Walters will receive a tax deduction upon exercise of the options equal to the excess of the market price at exercise over the exercise price. The income tax rate is 40%.

Required: 1. Determine the total compensation cost pertaining to the stock option plan. (Enter your answer in millions (i.e., 10,000,000 should be entered as 10).)

2. Prepare the necessary journal entries. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in millions (i.e., 10,000,000 should be entered as 10).)

1. Record compensation expense on December 31, 2016.

2. Record any tax effect related to compensation expense recorded in 2016.

3. Record compensation expense on December 31, 2017.

4. Record any tax effect related to compensation expense recorded in 2017.

5. Record the exercise of the options on March 20, 2021 when the market price is $12 per share.

6. Record any tax effect related to the exercise of the options.

carminemuskrat246

MGAC50H3 Final: Final Crib Sheet

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