Question 1

When a publicly-traded CEO's salary exceeds $1,000,000,the employee ________ taxed 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 
D)  is not; is not 
A)  is; is 
B)  is; is not 
C)  is not; is 
D)  is not; is not

Question 2

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?

Accepted Answer

$0
Because the discount was le

Question 3

Current compensation is usually comprised of salary,wages,and bonuses.

Accepted Answer

A) True 
 B)False

Question 4

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 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 5

Kaijsa received 20 NQOs (each option gives her the right to purchase 30 shares of stock for $8 per share)from her employer at the time she started working when the stock price was $9 per share.Now that the share price is $18 per share,she intends to exercise all of her options.If Kaijsa holds the shares for two years and sells them when the market price is $25,what is the amount of the deduction and tax savings her employer will receive (assume the employer's marginal tax rate is 30 percent)?

Accepted Answer

$6,000 deduction and $1,800 in tax savin

Question 6

Fringe benefits are generally a form of non-cash compensation.

Accepted Answer

A) True 
 B)False

Question 7

One purpose of Form W-4 is to determine an employee's withholding.

Accepted Answer

A) True 
 B)False

Question 8

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 9

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

Accepted Answer

A) True 
 B)False

Question 10

Which of the following forms is filled out by an employee,who is a citizen,at the beginning of an employment relationship?

Accepted Answer

A)  Form Q-2. 
B)  Form W-2. 
C)  Form W-4. 
D)  Form 1099. 
A)  Form Q-2. 
B)  Form W-2. 
C)  Form W-4. 
D)  Form 1099.

Question 11

Bad Brad received 20 NQOs (each option gives him the right to purchase 30 shares of stock for $12 per share)from his employer.At the time he started working,the stock price was $11 per share.Now that the share price is $25 per share,he exercises all of the options.Two years later Bad Brad sells the stock for $27 per share.What is Bad Brad's basis in his stock for purposes of calculating the gain or loss at the time of the sale?

Accepted Answer

A)  $7,200. 
B)  $7,800. 
C)  $15,000. 
D)  $16,200. 
A)  $7,200. 
B)  $7,800. 
C)  $15,000. 
D)  $16,200.

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

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

Accepted Answer

A)  The limitation applies to all employees. 
B)  The limitation applies to all officers. 
C)  The limitation applies only to the CEO and three other highest compensated officers. 
D)  The limitation applies only to the CEO and three other highest compensated officers, not including the CFO. 
A)  The limitation applies to all employees. 
B)  The limitation applies to all officers. 
C)  The limitation applies only to the CEO and three other highest compensated officers. 
D)  The limitation applies only to the CEO and three other highest compensated officers, not including the CFO.

Question 14

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 15

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

Question 16

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

Accepted Answer

A)  The election freezes the value of the employee's compensation as of the grant date. 
B)  The election is an important tax planning tool if the stock is expected to increase in value. 
C)  The election must be made within 30 days of the grant date. 
D)  If an employee leaves before the vesting date, any loss is limited to $3,000. 
A)  The election freezes the value of the employee's compensation as of the grant date. 
B)  The election is an important tax planning tool if the stock is expected to increase in value. 
C)  The election must be made within 30 days of the grant date. 
D)  If an employee leaves before the vesting date, any loss is limited to $3,000.

Question 17

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 2017?

Accepted Answer

$0
$2,400 benefit less the $3,

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

Employers computing taxable income receive a deduction for reasonable salary and wages paid to employees.

Accepted Answer

A) True 
 B)False

Question 20

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

Accepted Answer

A) True 
 B)False

When a publicly-traded CEO's salary exceeds $1,000,000,the employee taxed on the entire amount,and the employer allowed a deduction on the entire amount.

Current compensation is usually comprised of salary,wages,and bonuses.

Fringe benefits are generally a form of non-cash compensation.

One purpose of Form W-4 is to determine an employee's withholding.

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

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

Which of the following forms is filled out by an employee,who is a citizen,at the beginning of an employment relationship?

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

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?

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 2017?

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

Employers computing taxable income receive a deduction for reasonable salary and wages paid to employees.

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

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

Filters

Exam 12: Compensation

When a publicly-traded CEO's salary exceeds $1,000,000,the employee ________ taxed on the entire amount,and the employer ________ allowed a deduction on the entire amount.

Current compensation is usually comprised of salary,wages,and bonuses.

Fringe benefits are generally a form of non-cash compensation.

One purpose of Form W-4 is to determine an employee's withholding.

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

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

Which of the following forms is filled out by an employee,who is a citizen,at the beginning of an employment relationship?

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

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?

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 2017?

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

Employers computing taxable income receive a deduction for reasonable salary and wages paid to employees.

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

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

Filters

When a publicly-traded CEO's salary exceeds $1,000,000,the employee taxed on the entire amount,and the employer allowed a deduction on the entire amount.