Exam 12: Compensation

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 to receive any tax deduction for the insurance as a medical expense). Lina's employer has a 21 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.)

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 to receive any tax deduction for the insurance as a medical expense). Because of group discounts, her employer can purchase the insurance for $6,000. Lina's employer has a 21 percent marginal tax rate. What would be the after-tax cost to Lina's employer to provide her with health insurance?

Flexible spending accounts allow employees to set aside before-tax dollars for medical and dependent care expenses.

Which of the following benefits cannot be excluded as a no additional cost service fringe benefit?

Up to $5,250 of educational benefits can be excluded from an employee's compensation.

Which of the following statements concerning cafeteria plans is True?

Aharon exercises 10 stock options awarded several years ago. The following information pertains to the options: (1) each option gives the employee the right to buy 10 shares, (2) the market price on the grant date was $7, (3) the strike price is $10, and (4) the market price on the exercise date was $15. How much will it cost Aharon to purchase the options on the exercise date?

Corinne's employer offers a cafeteria plan that allows employees to choose among a number of benefits. Each employee is allowed $12,000 in benefits. For the current year, Corinne selected $4,500 of health insurance, $5,500 of dependent care, $1,000 in 401(k) contributions, and $1,000 of cash. How much must Corinne include in taxable income?

For 2018, up to $300 of transportation fringe benefits can be excluded from income.

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

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?

The employee's income for restricted stock is typically measured on the grant date.

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

Leesburg paid its employee $200,000 of compensation for the year. What is the after-tax cost of paying the salary assuming a 21 percent marginal tax rate (ignore payroll taxes)?

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?

Employees will always prefer to receive incentive stock options over nonqualified stock options.

Employers always prefer to award incentive stock options rather than nonqualified stock options.

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?

Which of the following statements is True regarding the $1,000,000 limit on covered employees for publicly traded companies?

Which of the following is False regarding a section 83(b) election?