Exam 12: Compensation

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

Employees complete a Form W-2 to specify their income tax withholding.

Hotel employees can receive free nights lodging on a space available basis without incurring compensation.

Lara,a single taxpayer with a 30 percent marginal tax rate,desires health insurance.The health insurance would cost Lara $5,000 to purchase if she pays for it herself (Lara's AGI is too high to receive any tax deduction for the insurance as a medical expense).Lara's employer has a 40 percent marginal tax rate.Ignoring payroll taxes,what is the maximum amount of before-tax salary Lara would give up to receive health insurance? (Round your answer to the nearest whole number)

Tasha receives reimbursement from her employer for dependent care expenses for up to $8,000.Tasha applies for and receives reimbursement of $6,000 for her 10-year-old son.How much,if any,is includible in her income?

How is the bargain element for a stock option calculated?

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

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.What is the amount of Stevie's ordinary income with respect to the restricted stock?

Hope's employer is now offering group-term life insurance.The company will provide each employee with $200,000 of group-term life insurance.It costs Hope's employer $700 to provide this amount of insurance to Hope each year.Assuming that Hope is 27 years old,use the table to determine the monthly premium that Hope must include in income as a result of receiving the group-term life benefit? EXHIBIT 12-10 Uniform Premiums for $1,000 of Group-Term Life Insurance Protection 5- Year Age Bracket Cost per \ 1,000 of Protection for One Month Under 25 \ 0.05 25 to 29 0.06 30 to 34 0.08 35 to 39 0.09 40 to 44 0.10 45 to 49 0.15 50 to 54 0.23 55 to 59 0.43 60 to 64 0.66 65 to 69 1.27 70 and above 2.06

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

Which of the following items is not included on an employee's Form W-2?

Which of the following statements regarding compensation is false?

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?

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?

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 income inclusion?

Leesburg paid its employee $200,000 of compensation for the year.What is the after-tax cost of paying the salary assuming a 30 percent marginal tax rate (ignore payroll taxes)?

Tom recently received 2,000 shares of restricted stock from his employer,Independence Corporation,when the share price was $10 per share.Tom's restricted shares vested three years later when the market price was $14.Tom held the shares for a little more than a year and sold them when the market price was $20.What is the amount of Tom's income or loss on the vesting date?

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?

For 2017,up to $300 of qualified transportation fringe benefits can be excluded from income.

Maren received 10 NQOs (each option gives her the right to purchase 10 shares of stock for $8 per share)at the time she started working when the stock price was $6 per share.When the share price was $15 per share,she exercised all of her options.Eighteen months later she sold all of the shares for $20 per share.How much gain will Maren recognize on the sale of the shares and how much tax will she pay assuming her marginal tax rate is 39.6 percent?