Exam 4: Employee Compensation

An employee holiday party would be a tax-exempt de minimis fringe benefit.

If an employee is reimbursed through an accountable plan which of the following is not true?

An employee who receives a nonqualified stock option recognizes income when the option is received and when it is exercised regardless of the strike price.

In 2018 Lindsey decides she no longer wants to work in public accounting and decides to attend massage therapy school so that she may work as a massage therapist. She spends $6,000 for the education, obtains the required training and licensures in 2018, and began working with clients within her new career as a massage therapist in November 2018. For Susie, is the massage therapy school a work-related education expense?

Five years ago, Devin Corporation granted Laura nonqualified stock options to buy 1,000 shares of Devin stock at $22 per share exercisable for six years. At the date of grant, the stock was selling for $19 per share. Laura exercised the options this year when the market price was $28 per share. How much income must Laura recognize from the exercise of the options?

What is a Keogh plan?

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?

Briefly contrast the FICA tax on an employee with the self-employment tax paid by an independent contractor.

Which of the following is a working condition fringe benefit?

Tavis works for a company that sponsors a flexible spending arrangement (FSA) as part of the cafeteria plan. Tavis's annual salary is $150,000 before any reduction for contributions to the FSA. Tavis elects to fund his FSA by reducing his salary by $2,500 to pay for medical and dental expenses not covered by insurance. Tavis pays $2,420 in qualified expenses through the FSA. The unused $80 is retained by the plan. Tavis received no distributions from this plan. Tavis's employer also paid $470 for premiums on a $240,000 face value group term life insurance policy for him. The group term life insurance rate is $0.15 per month per $1,000. Tavis is a key employee but it is not a discriminatory plan. How much gross income must Tavis report on his tax return?

Tom, a calendar-year taxpayer, worked in Japan from July 1, 2017 through June 30, 2018. He earned $80,000 in 2017 and $90,000 in 2018 while in Japan. The maximum foreign earned income exclusion amount is $102,100 for 2017 and $103,900 for 2018. Which of the following statements is true?

Self-employed individuals make the deposits to their self-employment taxes in the months of April, July, September, and January.

Which of the following fringe benefit does not impose a limit on the amount eligible as a tax-free benefit?

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 income does John recognize in 2016 when he exercised the options if they are incentive stock options?

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 incentive stock options?

Walter works busy season at the Seaside Hotel. for the 6 months he works there, his employer pays Walter a salary of $1,200 per month and gives him an additional $200 per month to help pay the cost of health insurance that he purchases for himself. The employer also supplies him with uniforms required to worn on the job valued at $700. What is Walter's taxable income for the six months that he works at the hotel?

A U. S. citizen working in a foreign country with a higher tax rate on income than the U. S. tax rate, is usually better off claiming the foreign tax credit than the foreign earned income exclusion.

What are the tax consequences to Sherry and Azores Corporation if the company grants Sherry 1,000 stock appreciation rights when the stock is selling for $23 per share, and she exercises these rights four years later when the stock is selling for $35 per share?

The Rabbi trust is a type of qualified retirement plan.

Explain a flexible spending arrangement for uninsured health costs and why it is beneficial to a taxpayer.