Slugger Jones is the CEO of Diamond Baseball Equipment, Inc. (Diamond). It is a rapidly...
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Slugger Jones is the CEO of Diamond Baseball Equipment, Inc. (Diamond). It is a rapidly growing publicly traded company. Slugger was awarded the following stock options from his company
| Option Grant | Grant Date | Type | Exercise Price | # Shares |
| A | February 1, Year 1 | ISO | $20 | 100 |
| B | July 1, Year 2 | NQSO | $25 | 100 |
| C | August 1, Year 3 | ISO | $30 | 100 |
| D | May 1, Year 4 | NQSO | $30 | 100 |
During Year 5, Slugger had the following transactions regarding the above stock options:
| Option Grant | Date | Action | # Shares | Market Price on Action Date |
| A | February 1 | Exercised | 100 | $42 |
| A | February 1 | Sold | 100 | $42 |
| B | February 14 | Exercised | 100 | $45 |
| C | February 14 | Exercised | 100 | $45 |
| D | May 1 | Exercised | 100 | $50 |
| D | June 1 | Sold | 100 | $60 |
Note: before answering these questions it can help to draw out a timeline.
- How much income would Slugger have when his ISOs are granted?
- What are the tax implications for the A options during Year 5?
- What are the tax implications for the B options during Year 5?
- What are the tax implications for the C options during Year 5?
- What are the tax implications for the D options during Year 5?
- Over the last five years, Slugger's salary has increased from $450,000 to $900,000 and his annual bonus has increased to $400,000 as the market value of the company has increased. What are some of the tax implications for the company and for Slugger?
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