Unit1 question

Under Rule 144, which of the following sales are subject to volume limitations? Control person selling registered stock held for one year Control person selling restricted stock held for two year Nonaffiliate selling registered stock held for one year Nonaffiliate selling restricted stock held for two year A) I and III B) I and II C) III and IV D) II and IV

B -Control persons are always subject to volume limitations.

All of the following statements regarding incentive stock options (ISOs) are correct except A) if the holding period is satisfied, the gain upon the sale of ISO shares will be a long-term capital gain B) the favorable tax treatment associated with ISOs is lost if the shares acquired through the ISO exercise are sold before 1 year from the date of grant or 2 years from the date of exercise C) upon the exercise of an ISO, income for AMT purposes is created D) the exercise of ISOs does not create taxable income

B) the favorable tax treatment associated with ISOs is lost if the shares acquired through the ISO exercise are sold before 1 year from the date of grant or 2 years from the date of exercise

A company's dividend on its common stock is A) specified in the company charter. B) mandatory if the company is profitable. C) determined by its board of directors. D) voted on by shareholders.

C) determined by its board of directors.

Three years ago, an investor purchased 1,000 shares of stock in the Equity Protective Life Insurance Company (EPLIC). The purchase price was $53 per share. The current market value of EPLIC stock is $79 per share. If the investor is in the 24% federal income tax bracket, it is correctto state that A) the investor owes tax on a $26,000 long-term capital gain. B) the investor's tax liability is $3,900. C) no tax is owed by the investor. D) the investor owes tax on a $26,000 short-term capital gain. Explanation Because the investor has not sold the EPLIC stock, the gain is unrealized. It is only when a gain (or loss) is realized that there are tax consequences. Had the stock been sold, it would have been a long-term capital gain, which is taxed at 15% rather than the investor's marginal rate.

C) no tax is owed by the investor. Because the investor has not sold the EPLIC stock, the gain is unrealized. It is only when a gain (or loss) is realized that there are tax consequences. Had the stock been sold, it would have been a long-term capital gain, which is taxed at 15% rather than the investor's marginal rate.

Which of the following are subject to the holding period requirements of Rule 144 of the Securities Exchange Act of 1934? Registered securities held by a control person Unregistered securities held by a noncontrol person Registered securities held by a noncontrol person Unregistered securities held by a control person

The holding period requirement of Rule 144 applies to unregistered securities, no matter who the owner is.