Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

When stock options are exercised they are converted into actual employer stock.

Accepted Answer

A) True 
 B)False

Question 3

Group-term life insurance is a fringe benefit that can be partially taxable and partially tax free.

Accepted Answer

A) True 
 B)False

Question 4

Big Bucks, a publicly-traded corporation, paid its CEO $1,500,000 of base compensation for the year. What is the after-tax cost of paying the salary assuming a 30 percent marginal tax rate?

Accepted Answer

$1,200,000

Question 5

Stock options will always provide employees with future compensation.

Accepted Answer

A) True 
 B)False

Question 6

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. How much cash will Hazel need on the exercise date?

Accepted Answer

$1,400.
20 options ×

Question 7

Employers cannot discriminate between highly and non-highly compensated employees when providing taxable fringe benefits.

Accepted Answer

A) True 
 B)False

Question 8

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 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 25 percent?

Accepted Answer

$1,000 and $200.
The gain real

Question 9

Lina, a single taxpayer with a 35 percent marginal tax rate, desires health insurance. The health insurance would cost Lina $8,000 to purchase if she pays for it herself (Lina's AGI is too high toreceive any tax deduction for the insurance as a medical expense). Lina's employer has a 30 percent marginal tax rate. What is the maximum amount of before-tax salary Lina would give up to receive health insurance? (Round your answer to the nearest whole number.)

Accepted Answer

$12,308
$8

Question 10

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 after vesting and sold them when the market price was $15. What is the amount of Rick's compensation income if Rick made an election under section 83(b) when the stock was granted? Assuming a marginal tax rate of 30 percent, what is the amount of Rick's ordinary income amount and tax liability at the time of the incomeinclusion?

Accepted Answer

$2,500 and $750
500 shares × $

Question 11

Which of the following is not an example of a taxable fringe benefit?

Accepted Answer

A)  $1,000,000 group term life insurance policy. 
B)  $225 of employer provided parking. 
C)  Automobile allowance. 
D)  Personal use of corporate jet. 
A)  $1,000,000 group term life insurance policy. 
B)  $225 of employer provided parking. 
C)  Automobile allowance. 
D)  Personal use of corporate jet.

Question 12

Which of the following statements regarding restricted stock is false?

Accepted Answer

A)  Even if the value of restricted stock decreases from the price on the grant date, it retains some value to the employee. 
B)  Like stock options, restricted stock has to vest before it can be sold. 
C)  Like nonqualified stock options, the employee's income inclusion for restricted stock is the bargain element. 
D)  There is no effective tax planning elections for restricted stock. 
A)  Even if the value of restricted stock decreases from the price on the grant date, it retains some value to the employee. 
B)  Like stock options, restricted stock has to vest before it can be sold. 
C)  Like nonqualified stock options, the employee's income inclusion for restricted stock is the bargain element. 
D)  There is no effective tax planning elections for restricted stock.

Question 13

on the entire amount, and the employer ________ allowed a deduction on the entire amount.

Accepted Answer

A)  is; is 
B)  is; is not 
C)  is not; is not 
D)  is not; is 
A)  is; is 
B)  is; is not 
C)  is not; is not 
D)  is not; is

Question 14

Employer's expense for stock options is typically recognized earlier for book than tax purposes.

Accepted Answer

A) True 
 B)False

Question 15

Employees may exclude from income items such as occasional theatre tickets, t-shirts, or a Thanksgiving turkey.

Accepted Answer

A) True 
 B)False

Question 16

Employers computing taxable income under the accrual method to unrelated taxpayersmay deduct wages accrued as compensation expense in one year and paid in thesubsequent year, as long as the company makes the payment within 2½ months after the employer's year-end.

Accepted Answer

A) True 
 B)False

Question 17

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. How much income will Hazel recognize on the exercise date and how much tax will she pay assuming her marginal tax rate is 25 percent?

Accepted Answer

$2,600 and

Question 18

The date on which stock options are no longer subject to forfeiture is called the vesting date.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following isn't reported on the Form W-2?

Accepted Answer

A)  Indication as to whether an employee had more than one employer during the year. 
B)  The employee's taxable salary and wages. 
C)  Annual Federal and state withholding information. 
D)  Annual amount of Social Security and Medicare tax withholding information. 
A)  Indication as to whether an employee had more than one employer during the year. 
B)  The employee's taxable salary and wages. 
C)  Annual Federal and state withholding information. 
D)  Annual amount of Social Security and Medicare tax withholding information.

Question 20

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 $13 per share. Three years later, when the share price was $23 per share, she exercised all of her options. If Suzanne holds the shares for two additional years and sells them when the market price is $30, how much gain will Suzanne recognize on the sale and how much tax will she pay assuming her marginal tax rate is 39.6 percent?

Accepted Answer

$7,200 and $1,440.
The gain realized is

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

When stock options are exercised they are converted into actual employer stock.

Group-term life insurance is a fringe benefit that can be partially taxable and partially tax free.

Big Bucks, a publicly-traded corporation, paid its CEO $1,500,000 of base compensation for the year. What is the after-tax cost of paying the salary assuming a 30 percent marginal tax rate?

Stock options will always provide employees with future compensation.

Employers cannot discriminate between highly and non-highly compensated employees when providing taxable fringe benefits.

Which of the following is not an example of a taxable fringe benefit?

Which of the following statements regarding restricted stock is false?

on the entire amount, and the employer ________ allowed a deduction on the entire amount.

Employer's expense for stock options is typically recognized earlier for book than tax purposes.

Employees may exclude from income items such as occasional theatre tickets, t-shirts, or a Thanksgiving turkey.

Employers computing taxable income under the accrual method to unrelated taxpayersmay deduct wages accrued as compensation expense in one year and paid in thesubsequent year, as long as the company makes the payment within 2½ months after the employer's year-end.

The date on which stock options are no longer subject to forfeiture is called the vesting date.

Which of the following isn't reported on the Form W-2?

An Introduction to Tax

Tax Compliance, the Irs, and Tax Authorities

Tax Planning Strategies and Related Limitations

Individual Income Tax Overview, Exemptions, and Filing Status

Gross Income and Exclusions

Individual Deductions

Investments

Individual Income Tax Computation and Tax Credits

Business Income, Deductions, and Accounting Methods

Property Acquisition and Cost Recovery

Property Dispositions

Retirement Savings and Deferred Compensation

Tax Consequences of Home Ownership

Entities Overview

Corporate Operations

Accounting for Income Taxes

Corporate Taxation: Nonliquidating Distributions

Corporate Formation, Reorganization, and Liquidation

Forming and Operating Partnerships

Dispositions of Partnership Interests and Partnership Distributions

S Corporations

State and Local Taxes

The US Taxation of Multinational Transactions

Transfer Taxes and Wealth Planning

Filters

Exam 12: Compensation

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

When stock options are exercised they are converted into actual employer stock.

Group-term life insurance is a fringe benefit that can be partially taxable and partially tax free.

Big Bucks, a publicly-traded corporation, paid its CEO $1,500,000 of base compensation for the year. What is the after-tax cost of paying the salary assuming a 30 percent marginal tax rate?

Stock options will always provide employees with future compensation.

Employers cannot discriminate between highly and non-highly compensated employees when providing taxable fringe benefits.

Which of the following is not an example of a taxable fringe benefit?

Which of the following statements regarding restricted stock is false?

on the entire amount, and the employer ________ allowed a deduction on the entire amount.

Employer's expense for stock options is typically recognized earlier for book than tax purposes.

Employees may exclude from income items such as occasional theatre tickets, t-shirts, or a Thanksgiving turkey.

Employers computing taxable income under the accrual method to unrelated taxpayersmay deduct wages accrued as compensation expense in one year and paid in thesubsequent year, as long as the company makes the payment within 2½ months after the employer's year-end.

The date on which stock options are no longer subject to forfeiture is called the vesting date.

Which of the following isn't reported on the Form W-2?

An Introduction to Tax

Tax Compliance, the Irs, and Tax Authorities

Tax Planning Strategies and Related Limitations

Individual Income Tax Overview, Exemptions, and Filing Status

Gross Income and Exclusions

Individual Deductions

Investments

Individual Income Tax Computation and Tax Credits

Business Income, Deductions, and Accounting Methods

Property Acquisition and Cost Recovery

Property Dispositions

Retirement Savings and Deferred Compensation

Tax Consequences of Home Ownership

Entities Overview

Corporate Operations

Accounting for Income Taxes

Corporate Taxation: Nonliquidating Distributions

Corporate Formation, Reorganization, and Liquidation

Forming and Operating Partnerships

Dispositions of Partnership Interests and Partnership Distributions

S Corporations

State and Local Taxes

The US Taxation of Multinational Transactions

Transfer Taxes and Wealth Planning

Filters