Exam 4: Employee Compensation

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

Which of the following is a characteristic of an incentive stock option?

Pablo earns $85,000 from his regular job as a salesman and an additional $60,000 from his sole proprietorship in 2018. What is his self-employment tax (rounded to the nearest dollar)?

Warren has $62,400 of net income from his sole proprietorship. How much is his self-employment tax on this income in 2018?

Manuel's employer provides him with $80,000 of group term life insurance coverage for the year at no cost. The amount from the group term life insurance premium table for someone who is 40 years old is $0.10. How much must Manuel include in income as a result of this benefit if he is 40 years old and is not considered a key employee?

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?

Which of the following are characteristics of a Roth IRA?

Stock appreciation rights allow an employee to benefit from an increase in the value of the employer's stock without actually purchasing the stock.

What is the maximum deductible contribution that Erick (age 32 and single) can make in 2018 to an Individual Retirement Account(s) if he earns $62,000 and is not covered by an employer-sponsored retirement plan?

Howard is a cash-basis, calendar-year taxpayer. He works for Clyde Corporation, an accrual-basis, calendar-year corporation. Clyde authorizes a $10,000 bonus for Howard on December 20, year 1. It pays the bonus on March 31 of year 2. Which of the following is correct?

An employee who receives an incentive stock option normally recognizes no income until the stock acquired with the option is sold.

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?

George drives 10,000 personal miles on his company-owned car that cost $20,000. The standard mileage rate is 54.5¢ per mile for 2018 and the lease value of a car that cost $20,000 is $5,600. Under the cents-per-mile method, how is included in George's taxable compensation for 2018 for his personal use of the car?

What factors are used to determine if a person performing a task is self-employed or is an employee?

Prior to 2018, what relocation expenses are deductible by a self-employed person who changes his primary job location from Nashville to Chicago?

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 is selling for $18 per share at the grant date. In 2016, John exercises the options when the stock's selling price was $40 per share. In 2018, John sells the stock for $50 per share. What is ABC Corporation's deduction if they are nonqualified stock options?

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?

Which of the following is a taxable fringe benefit when paid by the employer?

Briefly explain the tax differences between a nonqualified stock option and an incentive stock option.

S corporations have an incentive to pay unusually low salaries to an employee-shareholder to avoid FICA taxes.