burke, inc. granted 1,000 nonqualified employee stock options with an estimated value of $2 per option. each option entitled the owner to purchase 1 share at a price of $10 per share (the price of the stock at grant date). the options vested immediately but none were exercised in the current year. what is the current year book-tax difference?

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04-11-2022
Business

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burke, inc. granted 1,000 nonqualified employee stock options with an estimated value of $2 per option. each option entitled the owner to purchase 1 share at a price of $10 per share (the price of the stock at grant date). the options vested immediately but none were exercised in the current year. what is the current year book-tax difference?

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AnkitM AnkitM · Answer 1 · 2022-11-13T19:25:03-05:00

the current year book-tax difference is $ 2,000, the reason being - expensed for book purposes with no commensurate tax deduction until exercised, creating a temporary and unfavorable difference.

The term "book-tax difference" refers to the difference between an asset's adjusted tax basis for U.S. federal income tax purposes and its carrying value as calculated at the time of any of the events mentioned in the definition of carrying value. Each Limited Partner's share of any Book-Tax Difference must be maintained by the General Partner in an account in their name. The Newly-Admitted Limited Partner's share of any such Book-Tax Difference shall be zero. Book-Tax Difference shall be allocated to the Limited Partners in accordance with Points immediately prior to the relevant event described in the definition of Carrying Value.

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