Tax perspective when he exercises the option

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Reference no: EM131966358

On Jan 1 of the current year (CY) Gates is given a nonqualified option to purchase 3,000 shares of stock in his employer at $10/ share for the next 10 years. The current value of the stock is $10/share. If Gates resigns before the end of the following year (12/31 CY+1) he forfeits the options. The value of the options is determined to be $23/share. On May 1 of the 3rd year (CY+2) when the stock is trading at $50/share Gates gives the company $30,000 to purchase the shares

A) What if anything is the book expense in years CY, CY+1 and CY+2?

B) What, if anything happens to Gates from a tax perspective when he exercises the option?

C) What if anything happens to Gates’s employer when Gates exercises the option?

Reference no: EM131966358

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