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Tim and Jonathan recently formed a corporation named TJ Inc. (or ?TJ?). On December 31, 2013, TJ issued 800,000 shares of common stock to Jonathan and 800,000 shares of common stock to Tim. Jonathan and Tim each paid $0.01 per share for their stock ($0.01 equaled the per share fair market value on December 31, 2013). Their stock is subject to a 4-year ?repurchase option? (at cost) in favor of TJ. Each TJ repurchase option will ?lapse? over time so that on December 31 (of 2014, 2015, 2016 and 2017), 200,000 shares will be released from the repurchase option. For example, if Jonathan quits TJ before December 31, 2017, TJ can repurchase Jonathan?s ?unvested shares? for $0.01 per share (no matter what the fair market value is on that date).;QUESTION 49;Assume that Tim DID NOT file a timely ?83(b) election.? On December 31, 2014, Tim is still working at TJ and thus 200,000 of Tim?s 800,000 shares are ?released? from the TJ repurchase option (i.e., 200,000 of Tim?s shares ?vest? on December 31, 2014). On that same day, the fair market value of the TJ stock equals $10.01 per share. What 2014 income, if any, must Tim report as a result of these events?;a. $8,000,000;b. $2,002,000;c. $2,000,000;d. $0;QUESTION 50;Assume that Jonathan DID file a timely ?83(b) election.? On December 31, 2014, Jonathan is also still working at TJ and thus 200,000 of Jonathan?s 800,000 shares are also ?released? from the TJ repurchase option (i.e., 200,000 of Jonathan?s shares ?vest? on December 31, 2014). On that same day, the fair market value of the TJ stock equals $10.01 per share. What 2014 income, if any, must Jonathan report as a result of these events?;a. $8,000,000;b. $2,002,000;c. $2,000,000;d. $0

 

Paper#80123 | Written in 18-Jul-2015

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