Question

kylo recently received 2,000 shares of restricted stock from his employer, independence corporation, when the share price was $10 per share. kylo's restricted shares vested three years later when the market price was $14. kylo held the shares for a little more than three years and sold them when the market price was $20. what is the amount of kylo's income or loss on the vesting date assuming an 83(b) election was not made?

Answer 1

Kylo's income on the vesting date, with no 83(b) election made, would be $8,000. This is calculated by taking the 2,000 shares and multiplying by the increase in share price from the time he received them to the vesting date ($4 per share increase).

Step-by-step explanation:

The question concerns the calculation of income or loss for Kylo on the vesting date of his restricted stock when an 83(b) election was not made. Kylo received 2,000 shares at $10 per share, which vested at a market price of $14. On the vesting date, assuming no 83(b) election, the income is calculated based on the difference in value from the time of vesting, not the initial receipt. Thus, Kylo's income would be the increase in the shares' value at vesting time, which is 2,000 shares multiplied by the increase in share price from $10 to $14 ($4 per share).

Calculating this, Kylo's income on the vesting date would be:

2,000 shares * ($14 - $10) = 2,000 shares * $4 per share = $8,000.