Question

Davin sells stock six monthsafter he received it as a distribution from a qualified stock bonus...

Davin sells stock six monthsafter he received it as a distribution from a qualified stock bonus plan. His company had taken $32,500 tax deduction because of the stock contribution to him. When the stock was distributed, he had a net unrealized appreciation (NUA) of $8,500. The fair market value of the stock and the sales price at the time of sale was $67,000. How much of the sale price will be subject to short-term capital gaintreatment?

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Answer #1

Answer :

As per Tax laws in USA the contribution in qualified stock bonus plan are tax deductible.

Hence, As per given data in problem that company had taken $ 32,500 as tax deduction due to contribution in qualified stock bonus plan. Hence, Initial investment of employee in qualified stock bonus plan be $ 32,500 .

As per the relevant tax law the net unrealized appreciation (NUA) at the time of stock distribution to employee be treated as short income or ordinary income or short term capital gain as such gain is arise at the time of distribution of stock. Hence, in given case it is $ 8,500.

The sale price that subject to short - term capital gain treatment be $ 41,000 ( i.e. $32,500 + $ 8,500 )

Long term Capital  Gain be $ 26,000 ( i.e. $ 67,000 - $ 26,000 )

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