Exam 4: Employee Compensation

When is a person eligible to use the foreign earned income exclusion?

Which of the following is not taxable to an employee when paid for by the employer?

During 2018, Lee Corporation paid Nicole a salary of $118,000 and a bonus of $20,000. How much (rounded to the nearest dollar) is Lee Corporation required to withhold from Nicole's compensation for her share of FICA taxes?

What is a Keogh plan?

Wilma is CEO of and owns 100 percent of WT Enterprises, a cash-basis, calendar-year corporation. The company has always been profitable but over the last five years Wilma's salary has increased from over $400,000 per year to over $1,000,000 and it has failed to pay dividends. Which of the following will not occur if the IRS determines that $500,000 of her salary is unreasonable?

Kerry became a bona fide resident of Spain in 2017. She worked in Spain for 180 days in 2017 earning $110,000. Due to a death in the family, Kerry had to leave her position in Spain in December of 2018 and return to the states. She was in Spain for 345 days and earned $125,000 in 2018. If the maximum foreign earned income exclusion amount is $102,100 for 2017 and $103,900 for 2018, how much of Kerry's income in 2017 and 2018 is eligible for the foreign earned income exclusions?

Sara, a cash-basis, calendar-year taxpayer, worked overseas for the past three years and is eligible for the foreign earned income exclusion for the income earned from January 1 through January 31, 2018 before she returned to the United States. She was paid $30,000 including bonuses for this month's work but she did not have to pay any foreign taxes on this income. The maximum foreign earned income exclusion for 2018 is $103,900. What is her foreign earned income exclusion for 2018?

Susie worked as a counselor at a wilderness camp for inner city children for six weeks during the summer. Her weekly benefits included a $200 salary, lodging in a private cabin valued at $60, and meals in the camp dining facilities worth $70. Susie was required by her employer to be available at all times during the 6-week period in case of emergencies. How much must Susie include in her gross income?

Which type of retirement plan guarantees a specific amount of income for the person upon retirement?

In a defined benefit retirement plan, the employer bears the financial risk for the plan investments.

Bill was awarded 3,000 options; each option allows him to purchase one share of BK's stock for $15. The stock is currently selling for $12 per share. Three years later, Bill exercises the options when the stock's selling price is $21 per share. Two years later, Bill sells the stock for $20 per share. What are Bill's and BK's tax consequences for these transactions if the options are: a. Incentive stock options b. Nonqualified stock options

During 2018, Jones Corporation paid Joshua a salary of $100,000 and a bonus of $30,000. What is Jones Corporation's deduction (rounded to the nearest dollar) for its share of FICA taxes paid on Joshua's compensation for 2018?

During 2018, Zach has net income from his sole proprietorship of $35,000. He also earned $106,600 as an employee in 2018. How much self-employment tax must Zach pay?

Carol owns a small curio shop that is incorporated as an S corporation. Her three children, Sara, age 16, Mark, age 19, and Corey, age 22, all help in the shop. Which of the children's wages are subject to FICA taxes?

ABC Corporation awarded John 1,000 options in 2014; each option allows him to purchase one share of ABC Corporation stock for $20. The ABC stock was selling for $18 per share at the grant date. In 2016, John exercised the options when the stock's selling price was $40 per share. In 2018, John sells the stock for $50 per share. How much gain does John recognize in 2018 when he sells the stock if they are incentive stock options?

Henry is an employee of Argus Corporation. His fringe benefits for the current year included: -$2,500 contributed by Argus to his qualified deferred compensation retirement plan. This year, the retirement plan earned $600 in interest and dividend income. Henry received no distributions from this plan -A $500,000 face value group term life insurance policy for which Argus paid premiums of $650. Henry is a key employee and it is a discriminatory plan. The uniform monthly premium for $1,000 of group term life insurance is $0.15. -The use of a company-owned automobile. The annual lease value of this car is $15,000. Henry used it 70% of the time (and miles) for personal use and 30% for business use. -Free parking in the company parking lot (valued at $100 per month) How much must Henry include in gross income?

As long as the plan is nondiscriminatory, any life insurance provided employees as a fringe benefit is tax-exempt.

Carole, age 38, is single and works as a physical therapist. She is covered by her employer's retirement plan. What is the maximum deductible contribution she can make to a traditional IRA in 2018 if her AGI is $65,000? AGI Phase-Out Ranges for 2018 IRAs

Harris Corporation granted Tyler 1,000 stock appreciation rights in 2013 when the stock was selling for $25 per share. In 2018, when the stock is selling for $60 per share, Tyler exercises these rights. How much income does Tyler recognize and in which year?

George is 34 years old. His employer provides him with $200,000 of group term life insurance as a fringe benefit. The policy costs his employer $25 per month. The amount from the table for group term life insurance premiums is $0.08. How much income does George have for the year if?