Reference no: EM131560426

1. TH, Inc. pays $100,000 in dividends in 2015 with $25,000 going to Mr. Ableguy. Mr. Ableguy owns 25% of the outstanding stock. TH Inc began 2015 with a deficit of $2,000 in its accumulated earnings and profits, but it has $10,000 of current earnings and profits in 2015. How much dividend income will Mr. Ableguy recognize from his investment in TH, Inc in 2015?

2. DR received a grant of 5,000 qualified stock options (incentive stock options, ISOs) from his employer, ABC Corporation in 2012 with an exercise price of $15 per share. The options vested after 1 year. At the time of the grant in 2012, the stock was selling for $18 per share. Using an option pricing model these options were valued at $48,000 and his employer, ABC deducted $48,000 in its 2012 financial statements. DR exercised these options in 2015 when the stock was selling for $25 per share.