Question 1

Which of the following is true regarding stock options?

Accepted Answer

A)  A loss is realized when stock options lapse. 
B)  There is typically no tax effect on the grant date. 
C)  Income recognized on the exercise date is greater for incentive stock options than nonqualified options. 
D)  The bargain element on a nonqualified option is taxed to employees at capital gain rates. 
A)  A loss is realized when stock options lapse. 
B)  There is typically no tax effect on the grant date. 
C)  Income recognized on the exercise date is greater for incentive stock options than nonqualified options. 
D)  The bargain element on a nonqualified option is taxed to employees at capital gain rates.

Question 2

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 3

Which of the following is not a requirement of a "qualified employee discount"?

Accepted Answer

A)  The discount relates to goods or services of the employer. 
B)  The discount on services doesn't exceed 20 percent of the price offered to customers. 
C)  The discount can be elected up to five times annually. 
D)  The employee discount on goods is not greater than employer's average gross profit. 
A)  The discount relates to goods or services of the employer. 
B)  The discount on services doesn't exceed 20 percent of the price offered to customers. 
C)  The discount can be elected up to five times annually. 
D)  The employee discount on goods is not greater than employer's average gross profit.

Question 4

The use of restricted stock is increasing relative to the use of stock options.

Accepted Answer

A) True 
 B)False

Question 5

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 $650.
The bargain e

Question 6

Employers receive a deduction for compensation paid to and employment taxes paid on behalf of employees.

Accepted Answer

A) True 
 B)False

Question 7

On Form W-4,an employee can only claim one allowance for each personal or dependency exemption that will be claimed on the employee's income tax return.

Accepted Answer

A) True 
 B)False

Question 8

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 2017,Tanya selected $3,300 ($275 per month)of parking,$2,200 in 401(k)contributions,and $800 of cash.How much must Tanya include in taxable income?

Accepted Answer

A)  $0. 
B)  $1,040. 
C)  $1,120. 
D)  $4,000. 
A)  $0. 
B)  $1,040. 
C)  $1,120. 
D)  $4,000.

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

Jane is an employee of Rohrs Golf Emporium.The shop allows employees to purchase equipment at significant discount.This year Jane purchased several new items to improve her game.
   If the employer's average gross profit percentage is 30 percent,what amount must Jane include in income?

Accepted Answer

$40
$40 for the irons [($1,200

Question 11

An employee can indicate whether they want an additional amount withheld for payroll taxes on the Form W-4.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following is a fringe benefit that employers can discriminate among employees?

Accepted Answer

A)  No additional cost service. 
B)  Qualified employee discount. 
C)  Qualified transportation fringe. 
D)  Employee educational assistance. 
A)  No additional cost service. 
B)  Qualified employee discount. 
C)  Qualified transportation fringe. 
D)  Employee educational assistance.

Question 13

Which of the following statements concerning cafeteria plans is true?

Accepted Answer

A)  Allows employees to choose from a menu of fringe benefits or to choose cash. 
B)  Most of the menu choices are nontaxable fringe benefits. 
C)  Any receipt of cash option that is elected is treated at taxable compensation. 
D)  All of the statements are true. 
A)  Allows employees to choose from a menu of fringe benefits or to choose cash. 
B)  Most of the menu choices are nontaxable fringe benefits. 
C)  Any receipt of cash option that is elected is treated at taxable compensation. 
D)  All of the statements are true.

Question 14

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 30 percent?

Accepted Answer

$2,100.
The after-tax proceeds

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

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?

Accepted Answer

$4,800.
20 options ×

Question 17

Which of the following does not qualify as a "for the convenience of the employer" nontaxable fringe benefit?

Accepted Answer

A)  The fair market value of the rent of an apartment manager living on the premises. 
B)  An overtime meal provided to an employee while working late. 
C)  A meal provided by a hospital to residents during their shift. 
D)  A company picnic. 
A)  The fair market value of the rent of an apartment manager living on the premises. 
B)  An overtime meal provided to an employee while working late. 
C)  A meal provided by a hospital to residents during their shift. 
D)  A company picnic.

Question 18

If certain conditions are met,an apartment manager can exclude the fair market value of free rent from his or her income.

Accepted Answer

A) True 
 B)False

Question 19

Kevin is the financial manager of Levingston BMW.The shop allows employees to purchase up to two vehicles at a discount.Levingston's average gross profit percentage is 15%.This year Kevin purchased a 530 model and a new M3. $$\begin{array} { c c c c } 
\text { Model } & \text { FMV } & \text { Dealer cost } & \text { Employee Price } \
530 & \$ 63,000 & \$ 50,000 & \$ 54,000 \
\text { M3 } & \$ 10,000 & \$ 60,000 & \$ 57,000
\end{array}$$ What amount must Kevin include in income?

Accepted Answer

A)  $0. 
B)  $2,500. 
C)  $2,950. 
D)  $22,000. 
A)  $0. 
B)  $2,500. 
C)  $2,950. 
D)  $22,000.

Question 20

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.Assuming that Rick made an election under section 83(b)when the stock was granted and that his marginal tax rate is 30 percent,what is the amount of Rick's income inclusion and tax liability upon the sale of the stock?

Accepted Answer

$5,000 and $1,000.
$5,000 [500

Which of the following is true regarding stock options?

Which of the following is not a requirement of a "qualified employee discount"?

The use of restricted stock is increasing relative to the use of stock options.

Employers receive a deduction for compensation paid to and employment taxes paid on behalf of employees.

On Form W-4,an employee can only claim one allowance for each personal or dependency exemption that will be claimed on the employee's income tax return.

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 2017,Tanya selected $3,300 ($275 per month)of parking,$2,200 in 401(k)contributions,and $800 of cash.How much must Tanya include in taxable income?

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

Jane is an employee of Rohrs Golf Emporium.The shop allows employees to purchase equipment at significant discount.This year Jane purchased several new items to improve her game. If the employer's average gross profit percentage is 30 percent,what amount must Jane include in income?

An employee can indicate whether they want an additional amount withheld for payroll taxes on the Form W-4.

Which of the following is a fringe benefit that employers can discriminate among employees?

Which of the following statements concerning cafeteria plans is true?

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

Which of the following does not qualify as a "for the convenience of the employer" nontaxable fringe benefit?

If certain conditions are met,an apartment manager can exclude the fair market value of free rent from his or her income.

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

Which of the following is true regarding stock options?

Which of the following is not a requirement of a "qualified employee discount"?

The use of restricted stock is increasing relative to the use of stock options.

Employers receive a deduction for compensation paid to and employment taxes paid on behalf of employees.

On Form W-4,an employee can only claim one allowance for each personal or dependency exemption that will be claimed on the employee's income tax return.

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 2017,Tanya selected $3,300 ($275 per month)of parking,$2,200 in 401(k)contributions,and $800 of cash.How much must Tanya include in taxable income?

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

Jane is an employee of Rohrs Golf Emporium.The shop allows employees to purchase equipment at significant discount.This year Jane purchased several new items to improve her game. If the employer's average gross profit percentage is 30 percent,what amount must Jane include in income?

An employee can indicate whether they want an additional amount withheld for payroll taxes on the Form W-4.

Which of the following is a fringe benefit that employers can discriminate among employees?

Which of the following statements concerning cafeteria plans is true?

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

Which of the following does not qualify as a "for the convenience of the employer" nontaxable fringe benefit?

If certain conditions are met,an apartment manager can exclude the fair market value of free rent from his or her income.

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