Santini\'s new contract for 2017 indicates the following compensation and benefi

Question

Santini's new contract for 2017 indicates the following compensation and benefits Benefit Description Salary Health insurance Restricted stock grant Bonus Hawaii trip Group-term life insurance Parking ($309 per month) Amount $131,50e 1e,200 3,700 5,600 4,480 1,840 3,708 Santini is 54 years old at the end of 2017. He is single and has no dependents. Assume that the employer matches $1 for $1 for the first $6,000 that the employee contributes to his 401(k) during the year. The 100 ISOs each allow the purchase of 10 shares of stock at a strike price of $7.4 (also the market price on the date of grant). The ISOs vest in two years when the stock price is expected to be $15 and Santini expects to sell the shares in three years when the market price is $20. The restricted stock grant is 500 shares granted when the market price was $7.4 per share. Assume that the stock vests on December 31, 2017, and that the market price on that date is $9.9 per share. Also assume that Santini is willing to make any elections to reduce equity- based compensation taxes. The Hawaii trip was given to him as the outstanding sales person for 2016. The group-term life policy gives him $150,000 of coverage. Assume that Santini does not itemize deductions for the year. Assume that Santini makes a section 83(b) election. Determine Santini's taxable income and income tax liability for 2017. Use Tax rate schedules and Exhibit 12-10. (Do not round

Explanation / Answer

amount

146366

(addition all Taxable benefits)

135966

(AGI - standard deduction - personal exemption)

31052

(18713.75 + 28%*(135966-91900))

Description

amount

Taxable benefits Salary 131500 Restricted stock grant 3700 Bonus 5600 Hawaii trip 4480 Life insurance (taxable portion) 276 Parking (309-255(statutory limit) * 12 months) 810 ISO 0 AGI

146366

(addition all Taxable benefits)

Standard deduction 6350 Personal exemption 4050 Taxable income

135966

(AGI - standard deduction - personal exemption)

Income tax liability

31052

(18713.75 + 28%*(135966-91900))

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