DAVID IS THE CEO FOR MID ATLANTIC COMPUTER ASSOCIATES. AS PART OF HIS COMPENSATION AGREEMENT, HE...

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Finance

DAVID IS THE CEO FOR MID ATLANTIC COMPUTER ASSOCIATES. AS PARTOF HIS COMPENSATION AGREEMENT, HE NEGOTIATES GOLDEN PARACHUTEPACKAGE THAT PAYS HIM 3.5 MILLION IN THE EVENT THE COMPANY ISACQUIRED OR HE IS TERMINATED. MID ATLANTIC WAS TAKEN OVER BYBRILLIANT MICRO COMPANY, AND DAVID WAS TERMINATED AND PAID 3.5MILLION. HIS BASE AMT OF COMPENSATION IS $1 MILLION. WHAT IS TAXCONSEQUENCES TO DAVID
TAXABLE INCOME OF 2.5 MILLION AND EXCISE TAX OF 200,000
TAXABLE INCOME OF 2.5 MILLION AND EXCISE TAX OF 500,000
TAXABLE INCOME OF 3.5 MILLION AND EXCISE TAX IF 500,000
TAXABLE INCOME OF 3.5 MILLION AND EXCISE TAX OF 700,000

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3.6 Ratings (341 Votes)

Answer The correct answer to the question is third option Taxable income of 35 million and excise tax of 500000 As per section 280 G of the Internal revenue code a penalty See Answer

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Transcribed Image Text

DAVID IS THE CEO FOR MID ATLANTIC COMPUTER ASSOCIATES. AS PARTOF HIS COMPENSATION AGREEMENT, HE NEGOTIATES GOLDEN PARACHUTEPACKAGE THAT PAYS HIM 3.5 MILLION IN THE EVENT THE COMPANY ISACQUIRED OR HE IS TERMINATED. MID ATLANTIC WAS TAKEN OVER BYBRILLIANT MICRO COMPANY, AND DAVID WAS TERMINATED AND PAID 3.5MILLION. HIS BASE AMT OF COMPENSATION IS $1 MILLION. WHAT IS TAXCONSEQUENCES TO DAVIDTAXABLE INCOME OF 2.5 MILLION AND EXCISE TAX OF 200,000TAXABLE INCOME OF 2.5 MILLION AND EXCISE TAX OF 500,000TAXABLE INCOME OF 3.5 MILLION AND EXCISE TAX IF 500,000TAXABLE INCOME OF 3.5 MILLION AND EXCISE TAX OF 700,000