Exam 12: Compensation

Which of the following pairs of items is not needed to calculate the after-tax proceeds for a same-day sale?

Suzanne received 20 ISOs (each option gives her the right to purchase 20 shares of stock for $12 per share)at the time she started working,when the stock price was $14 per share.Three years later,when the share price was $23 per share,she exercised all of her options.How much cash will Suzanne need on the exercise date of the stock options?

Tanya's employer offers a cafeteria plan that allows employees to choose among a number of benefits.Each employee is allowed $6,000 in benefits.For 2019,Tanya selected $3,420 ($285 per month)of parking,$1,780 in 401(k)contributions,and $800 of cash.How much must Tanya include in taxable income?

Qualified employee discounts allow employees to purchase employer goods at a discount.

Which of the following regarding the Form W-4 is incorrect?

Francis works for a local fly-fishing shop.The shop allows employees to purchase two fly rods per year at a discount.This year,Francis purchased one rod.The rod normally retails for $300,was purchased for $225,was sold to Francis for $250,and the employer's average gross profit percentage is 30 percent.What amount of the discount must be included in Francis's income?

Fringe benefits are generally a form of noncash compensation.

Raja received 20 NQOs (each option gives him the right to purchase 15 shares of stock for $10 per share)from his employer at the time he started working,when the stock price was $11 per share.Now that the share price is $20 per share,he intends to exercise all of the options using a same-day sale.What are Raja's after-tax proceeds from the sale if his marginal tax rate is 32 percent?

A section 83(b)election freezes the value of restricted stock for compensation purposes on the vesting date.

Brandy graduated from Vanderbilt with her bachelor's degree recently.She works for Walton & Company CPAs.The firm pays her tuition ($8,000 per year)for her so that she can receive her MBA.How much of the $8,000 tuition benefit does Brandy need to include in her income?

Which of the following statements regarding restricted stock is false?

For 2019,up to $300 of transportation fringe benefits can be excluded from income.

Annika's employer provides each employee with up to $200 of monthly vouchers for public transportation.What is the amount that Annika must include into income with respect to her benefit in 2019?

Hazel received 20 NQOs (each option gives her the right to purchase 10 shares of stock for $7 per share)at the time she started working,when the stock price was $14 per share.Now that the share price is $20 per share,she intends to exercise all of her options.If Hazel holds the shares for two years after exercise and sells them when the market price is $25,how much gain will Hazel recognize on the sale and how much tax will she pay,assuming her marginal tax rate is 37 percent?

Rick recently received 500 shares of restricted stock from his employer,Crazy Corporation,when the share price was $5 per share.Rick's restricted shares vested three years later,when the market price was $12.Rick held the shares for a little more than a year and sold them when the market price was $15.What is the amount of Rick's income on the vesting date? Assuming a marginal tax rate of 32 percent,what is Rick's tax on the restricted stock?

Stevie recently received 1,000 shares of restricted stock from her employer,Nicks Corporation,when the share price was $8 per share.Stevie's restricted shares vested three years later when the market price was $11.Stevie held the shares for a little more than a year and sold them when the market price was $16.Assuming Stevie made a section 83(b)election,what is the amount of Stevie's ordinary income with respect to the restricted stock?

Frederique works for a furniture retailer.The shop allows all employees to purchase 10 pieces of furniture per year at a discount.This year Frederique purchased eight pieces.She gave three pieces as a gift to her brother as a wedding present.Her employer's average gross profit percentage is 25 percent.Each piece was 20 percent off of normal retail prices and in all cases the employee price exceeded the employer's cost.What amount of the discount must be included in Frederique's income?

Employers computing taxable income under the accrual method to unrelated taxpayers may deduct wages accrued as compensation expense in one year and paid in the subsequent year,as long as the company makes the payment within two and a half months after the employer's year-end.

Which of the following refers to the date stock options are awarded to an employee?

One primary purpose of equity compensation is to motivate employees.