In 2014 corporation x entered into a forward contract with, Ask an Expert

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In 2014, Corporation X entered into a forward contract with Corporation Y whereby X would purchase 10 shares of ABC Corporation’s stock from Y for $10 on February 3, 2016. On February 3, 2015, the ABC Corporation stock had appreciated and the forward contract is worth $110. The forward contract settles on February 3, 2016 and X pays $10 for the ABC stock which is delivered to X on that date.

1. What must X include in gross income with respect to the foregoing transaction in 2015?

2. What must X include in gross income with respect to the foregoing transaction in 2016?

3. What are the tax consequences if X sells all 10 shares of ABC stock on February 3, 2017 at $12 a share?

4. Assume Y purchased 10 shares of ABC stock in 2000 at $5 a share. What are the tax consequences to Y when the forward contract settles on February 3, 2016?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92720035

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