Stevie recently received 1,000 shares of restricted stock from her employer,Nicks Corporation,when the share price was $8 per share.Stevie's restricted shares vested three years later when the market price was $11.Stevie held the shares for a little more than a year and sold them when the market price was $16.Assuming Stevie made a section 83(b) election,what is the amount of Stevie's ordinary income with respect to the restricted stock?
A)$0.
B)$5,000.
C)$8,000.
D)$11,000.$8,000 (1,000 shares × $8 market price on grant date) .

Question

Quizplus · Accepted Answer

When Stevie received the restricted stock, it had a value of 1,000 shares x $8 per share = $8,000. Assuming she made a section 83(b) election, she included this $8,000 in her ordinary income in the year she received the stock. When the shares vested three years later, the market price was $11 per share, so the total value of the shares was 1,000 shares x $11 per share = $11,000. Stevie did not owe any additional ordinary income tax at this time, as she had already included the value of the shares when she received them. When Stevie sold the shares a little over a year later when the market price was $16 per share, she realized a capital gain of 1,000 shares x ($16 selling price - $11 vesting price) = $5,000.

Stevie Recently Received 1,000 Shares of Restricted Stock from Her