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mc_q_23_24 - (d An increase of $3,500 Q24 Parts(i and(ii...

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MULTIPLE CHOICE QUESTIONS Q23. Parts (i) and (ii) are based on the following: Mr. Morra commenced employment with Peoples Bank Ltd., a public corporation, on September 1, 2001. On June 30, 2006, he was granted an option to purchase 500 shares of Peoples Bank Ltd. stock for $15 per share. The market value on June 30, 2006 was $16 per share. Mr. Morra exercised his option on May 31, 2008, purchasing 500 shares for $15 per share when the market value was $17 per share. On September 1, 2010, Mr. Morra sold the shares for $24 each. (i) What is the effect of the above transactions on Mr. Morra's taxable income in 2008? (a) Nil (b) An increase of $500 (c) An increase of $750 (d) An increase of $1,000 (ii) What is the effect of the above transactions on Mr. Morra's taxable income in 2010? (a) Nil (b) An increase of $1,750 (c) An increase of $3,000
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Unformatted text preview: (d) An increase of $3,500 Q24. Parts (i) and (ii) are based on the following. Scott Bicycle Manufacturing Ltd. (SBM) is a CCPC. Brian Mills, one of SBM's employees, was granted a stock option on October 11, 2001 for 10,000 shares at $3 per share. Brian exercised the stock option on September 30, 2005 when the market price was $6 per share. In March 2010, Brian purchased a new home and sold the shares for $7 each. The fair market value on October 11, 2001 was $4. Assume that Brian has used up his capital gains exemption. (i) What is the effect of the above on Brian's taxable income? (a) $15,000 in 2005 (b) $15,000 in 2010 (c) $20,000 in 2005 (d) $20,000 in 2010 (ii) What is the ACB to Brian of the SBM shares of the time of sale, March 2010? (a) $30,000 (b) $35,000 (c) $60,000 (d) $70,000 Page 1...
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