Question

Tom recently received 2,000 shares of restricted stock from his employer, Independence Corporation, when the share price was $10 per share. Tom's restricted shares vested three years later when the market price was $14. Tom held the shares for a little more than a year and sold them when the market price was $12. What is the amount of Tom's income or loss on the sale?

A. $0.
B. $2,010 loss.
C. $4,020 gain.
D. $4,020 loss

Answer 1

$4,000 LOSS

Step-by-step explanation:

$4,000 loss is $24,000 (2,000 shares × $12 market value on sale date) of sales proceeds less $28,000 (2,000 shares × $14 market price on vesting date) basis.

Answer 2

$4,000 gain

Step-by-step explanation:

The computation of the tom income or loss is shown below:

= Number of shares × (market price sold - fair value of share price)

= 2,000 shares × ($12 per share - $10 per share)

= $4,000 gain

This is the answer and the same is not provided in the given options.

We simply take the difference between the market price sold and the fair value of share price and then multiply it by the number of shares so that the correct amount can come

All other information which is given is not relevant. Hence, ignored it