Question 1

How is the bargain element for a stock option calculated?

Accepted Answer

A)  The difference between the strike price and the market price on the date of grant. 
B)  The difference between the market price on the exercise date and the market price on the date of grant. 
C)  The difference between the market price on the exercise date and the strike price. 
D)  The difference between the market price on the sale date and the strike price. 
A)  The difference between the strike price and the market price on the date of grant. 
B)  The difference between the market price on the exercise date and the market price on the date of grant. 
C)  The difference between the market price on the exercise date and the strike price. 
D)  The difference between the market price on the sale date and the strike price.

Question 2

Which of the items is not correct regarding withholding?

Accepted Answer

A)  Employees that also have self employment income can have additional amounts withheld to avoid estimated tax payments. 
B)  Employees cannot claim an allowance for a child unless they are entitled to claim the child as a dependent. 
C)  Employees can claim exempt and avoid withholding. 
D)  Married employees can choose to be withheld at the higher single rates. 
A)  Employees that also have self employment income can have additional amounts withheld to avoid estimated tax payments. 
B)  Employees cannot claim an allowance for a child unless they are entitled to claim the child as a dependent. 
C)  Employees can claim exempt and avoid withholding. 
D)  Married employees can choose to be withheld at the higher single rates.

Question 3

Kimberly's employer provides her with a personal travel allowance of $10,000 annually. Her marginal tax rate is 30 percent. Her employer has a marginal tax rate of 35 percent. What is Kimberly's after-tax benefit, ignoring payroll taxes?

Accepted Answer

The answer of Kimberly's employer provides her with a personal...

Question 4

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

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

Question 5

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 and how much tax will she pay assuming her marginal tax rate is 35 percent?

Accepted Answer

A)  $0 gain and $0 tax. 
B)  $500 gain and $75 tax. 
C)  $500 gain and $175 tax. 
D)  $1,200 gain and $180 tax. 
A)  $0 gain and $0 tax. 
B)  $500 gain and $75 tax. 
C)  $500 gain and $175 tax. 
D)  $1,200 gain and $180 tax.

Question 6

Which of the following statements regarding compensation is false?

Accepted Answer

A)  Wages are usually paid by the hour. 
B)  Salary is usually a form of fixed compensation. 
C)  Bonuses are a form of compensation obtained if certain criteria are met. 
D)  Bonuses paid within 2½ months of year end are included in employee's compensation in the year they were earned. 
A)  Wages are usually paid by the hour. 
B)  Salary is usually a form of fixed compensation. 
C)  Bonuses are a form of compensation obtained if certain criteria are met. 
D)  Bonuses paid within 2½ months of year end are included in employee's compensation in the year they were earned.

Question 7

Which of the following isn't done by Form W-2?

Accepted Answer

A)  Summarizes the employee's taxable salary and wages. 
B)  Provides annual Federal and state withholding information. 
C)  Indicates whether an employee had more than one employer during the year. 
D)  Generated by an employer annually. 
A)  Summarizes the employee's taxable salary and wages. 
B)  Provides annual Federal and state withholding information. 
C)  Indicates whether an employee had more than one employer during the year. 
D)  Generated by an employer annually.

Question 8

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?

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 9

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

Accepted Answer

A) True 
 B)False

Question 10

Employer's expense for stock options is typically recognized earlier for book than tax purposes.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following statements regarding income tax withholding is incorrect?

Accepted Answer

A)  The withholding tables are designed so that employee withholding approximates the tax liability. 
B)  Large itemized deductions require the need for additional withholding. 
C)  The withholding tables vary based on filing status. 
D)  Extra allowances can be claimed and reduce withholding. 
A)  The withholding tables are designed so that employee withholding approximates the tax liability. 
B)  Large itemized deductions require the need for additional withholding. 
C)  The withholding tables vary based on filing status. 
D)  Extra allowances can be claimed and reduce withholding.

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

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.

Question 14

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 15

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

Accepted Answer

A) True 
 B)False

Question 16

Stock options will always provide employees with future compensation.

Accepted Answer

A) True 
 B)False

Question 17

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

The answer of Frederique works for a furniture retailer. The...

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

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 20

For 2014, up to $300 of qualified transportation fringe benefits can be excluded from income.

Accepted Answer

A) True 
 B)False

How is the bargain element for a stock option calculated?

Which of the items is not correct regarding withholding?

Kimberly's employer provides her with a personal travel allowance of $10,000 annually. Her marginal tax rate is 30 percent. Her employer has a marginal tax rate of 35 percent. What is Kimberly's after-tax benefit, ignoring payroll taxes?

Which of the following statements regarding compensation is false?

Which of the following isn't done by Form W-2?

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

Employer's expense for stock options is typically recognized earlier for book than tax purposes.

Which of the following statements regarding income tax withholding is incorrect?

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

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

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

Stock options will always provide employees with future compensation.

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

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)?

For 2014, up to $300 of qualified transportation fringe benefits can be excluded from 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

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

How is the bargain element for a stock option calculated?

Which of the items is not correct regarding withholding?

Kimberly's employer provides her with a personal travel allowance of $10,000 annually. Her marginal tax rate is 30 percent. Her employer has a marginal tax rate of 35 percent. What is Kimberly's after-tax benefit, ignoring payroll taxes?

Which of the following statements regarding compensation is false?

Which of the following isn't done by Form W-2?

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

Employer's expense for stock options is typically recognized earlier for book than tax purposes.

Which of the following statements regarding income tax withholding is incorrect?

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

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

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

Stock options will always provide employees with future compensation.

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

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)?

For 2014, up to $300 of qualified transportation fringe benefits can be excluded from 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

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