Reference no: EM132729155

Problem 1: On January 15, Year 1, Blake, a Senior Vice President for Acme Corporation, is granted 20,000 ISOs at an exercise price of $10. On February 6, Year 2, he exercises all his options when the price of Acme stock is $27. When can Blake sell the ISO shares and avoid a disqualifying disposition?

Option 1: January 16, Year 3.

Option 2: January 16, Year 4.

Option 3: February 7, Year 3.

Option 4: February 7, Year 4.

Problem 2: Blake was awarded 1,000 shares of restricted stock of Acme Corporation at a time when the stock price was $7. Assume Blake properly makes an 83(b) election at the date of the award. The stock vests 3 years later at a price of $19 and Blake sells it then. What are Blake's tax consequences in the year he sells the stock?

Option 1: Blake has W-2 income of $19,000.

Option 2: Blake has a long-term capital gain of $12,000.

Option 3: Blake has W-2 income of $12,000.

Option 4: Blake has a $19,000 long-term capital gain.