Question 1

Stock options will always provide employees with future compensation.

Accepted Answer

A) True 
 B)False

Question 2

Up to $10,000 of dependent care expenses can be excluded from an employee's compensation.

Accepted Answer

A) True 
 B)False

Question 3

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 4

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

Accepted Answer

A)  Free tax return preparation from a client. 
B)  Complementary dry cleaning for employees at a laundry company. 
C)  A car wash at an automobile dealership. 
D)  Free local phone service for phone company employees. 
A)  Free tax return preparation from a client. 
B)  Complementary dry cleaning for employees at a laundry company. 
C)  A car wash at an automobile dealership. 
D)  Free local phone service for phone company employees.

Question 5

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)?

Accepted Answer

The answer of Leesburg paid its employee $200,000 of compensation...

Question 6

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?

Accepted Answer

The answer of Brandy graduated from Vanderbilt with her bachelor's...

Question 7

Which of the following is not a purpose of equity-based compensation?

Accepted Answer

A)  Provide risk and incentives to employees. 
B)  Motivate employees by aligning employee and employer incentives. 
C)  Avoid compensation limits for executives. 
D)  Provides a low or no cost form of compensation. 
A)  Provide risk and incentives to employees. 
B)  Motivate employees by aligning employee and employer incentives. 
C)  Avoid compensation limits for executives. 
D)  Provides a low or no cost form of compensation.

Question 8

Which of the following regarding the Form W-4 is incorrect?

Accepted Answer

A)  Determines an employee's income tax withholding. 
B)  Employees can claim more allowances than personal exemptions that will be claimed. 
C)  Employees can specify additional amounts to be withheld each month. 
D)  The form can only be adjusted at the beginning of year or start of employment. 
A)  Determines an employee's income tax withholding. 
B)  Employees can claim more allowances than personal exemptions that will be claimed. 
C)  Employees can specify additional amounts to be withheld each month. 
D)  The form can only be adjusted at the beginning of year or start of employment.

Question 9

Bad Brad received 20 NQOs (each option gives him the right to purchase 30 shares of stock for $10 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 intends to exercise 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?

Accepted Answer

A)  $6,000. 
B)  $9,000. 
C)  $15,000. 
D)  $16,200. 
A)  $6,000. 
B)  $9,000. 
C)  $15,000. 
D)  $16,200.

Question 10

Rachel receives employer provided health insurance. The employer's cost of the health insurance is $6,000 annually. What is her employer's after-tax cost of providing the health insurance, assuming that the employer's marginal tax rate is 35 percent?

Accepted Answer

A)  $0 
B)  $3,900 
C)  $4,198 
D)  $6,000 
A)  $0 
B)  $3,900 
C)  $4,198 
D)  $6,000

Question 11

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?

Accepted Answer

A)  $0. 
B)  $5,000. 
C)  $8,000. 
D)  $11,000. 
A)  $0. 
B)  $5,000. 
C)  $8,000. 
D)  $11,000.

Question 12

Which of the following is false regarding dependent care expenses?

Accepted Answer

A)  Up to $5,000 of reimbursed expenses can qualify. 
B)  Employers may discriminate among employees. 
C)  Dependent children under 13 qualify. 
D)  Spouses who are physically or mentally unable to care for themselves qualify. 
A)  Up to $5,000 of reimbursed expenses can qualify. 
B)  Employers may discriminate among employees. 
C)  Dependent children under 13 qualify. 
D)  Spouses who are physically or mentally unable to care for themselves qualify.

Question 13

When a 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 14

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?

Accepted Answer

A)  $0. 
B)  $10,000. 
C)  $20,000. 
D)  $28,000. 
A)  $0. 
B)  $10,000. 
C)  $20,000. 
D)  $28,000.

Question 15

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

The answer of Raja received 20 NQOs (each option gives...

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

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 at 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 at 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 18

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

Accepted Answer

The answer of Big Bucks paid its CEO $1,500,000 of...

Question 19

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

The answer of Hazel received 20 NQOs (each option gives...

Question 20

Grace'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 Grace's employer $700 to provide this amount of insurance to Grace each year. Assuming that Grace is 43 years old, use the table to determine the monthly premium that Grace must include in income as a result of receiving the group-term life benefit.

Accepted Answer

A)  $0. 
B)  $15.00. 
C)  $22.00. 
D)  $58.33. 
A)  $0. 
B)  $15.00. 
C)  $22.00. 
D)  $58.33.

Stock options will always provide employees with future compensation.

Up to $10,000 of dependent care expenses can be excluded from an employee's compensation.

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

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

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)?

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?

Which of the following is not a purpose of equity-based compensation?

Which of the following regarding the Form W-4 is incorrect?

Rachel receives employer provided health insurance. The employer's cost of the health insurance is $6,000 annually. What is her employer's after-tax cost of providing the health insurance, assuming that the employer's marginal tax rate is 35 percent?

Which of the following is false regarding dependent care expenses?

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

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

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

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

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

Individual Income Tax Computation and Tax Credits

Business Income, Deductions, and Accounting Methods

Property Acquisition and Cost Recovery

Property Dispositions

Investments

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 of the Cfa Institute

Filters

Exam 12: Compensation

Stock options will always provide employees with future compensation.

Up to $10,000 of dependent care expenses can be excluded from an employee's compensation.

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

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

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)?

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?

Which of the following is not a purpose of equity-based compensation?

Which of the following regarding the Form W-4 is incorrect?

Rachel receives employer provided health insurance. The employer's cost of the health insurance is $6,000 annually. What is her employer's after-tax cost of providing the health insurance, assuming that the employer's marginal tax rate is 35 percent?

Which of the following is false regarding dependent care expenses?

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

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

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

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

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

Individual Income Tax Computation and Tax Credits

Business Income, Deductions, and Accounting Methods

Property Acquisition and Cost Recovery

Property Dispositions

Investments

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 of the Cfa Institute

Filters

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