Question 1

Flexible spending accounts allow employees to set aside before-tax dollars for medical and dependent care expenses.

Accepted Answer

A) True 
 B)False

Question 2

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

Accepted Answer

A) True 
 B)False

Question 3

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.  
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 4

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

Accepted Answer

A) True 
 B)False

Question 5

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 6

Cornhusker Bank reimburses employees for dues to the local bankers association. The reimbursement is includible in the employee's income.

Accepted Answer

A) True 
 B)False

Question 7

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 $12. What is the amount of Tom's income or loss on the sale?

Accepted Answer

A) $0 
B) $2,000 loss 
C) $4,000 gain 
D) $4,000 loss 
A) $0 
B) $2,000 loss 
C) $4,000 gain 
D) $4,000 loss

Question 8

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. What is the amount of Maren's bargain element?

Accepted Answer

A) $0. 
B) $700. 
C) $900. 
D) $1,500. 
E) None of these. 
A) $0. 
B) $700. 
C) $900. 
D) $1,500. 
E) None of these.

Question 9

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.The value of a company picnic is a nontaxable fringe benefit, but it is not a "for the convenience of the employer" benefit. 
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.The value of a company picnic is a nontaxable fringe benefit, but it is not a "for the convenience of the employer" benefit.

Question 10

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

Accepted Answer

A) The employee's taxable salary and wages. 
B) Annual Federal and state withholding information. 
C) Indication as to whether an employee had more than one employer during the year. 
D) Annual amount of Social Security and Medicare tax withholding information. 
A) The employee's taxable salary and wages. 
B) Annual Federal and state withholding information. 
C) Indication as to whether an employee had more than one employer during the year. 
D) Annual amount of Social Security and Medicare tax withholding information.

Question 11

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

Accepted Answer

A) True 
 B)False

Question 12

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 2016?

Accepted Answer

$0
Explanation: $2,400 benefit

Question 13

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 14

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.Employees include compensation into income in the year received. 
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.Employees include compensation into income in the year received.

Question 15

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 16

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
Ex

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 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 18

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

$2,750.
Explanation:

Question 19

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 20

Taxable fringe benefits include automobile allowances, gym memberships, and personal use tickets to the theatre or sporting events.

Accepted Answer

A) True 
 B)False

Exam 12: Compensation

Flexible spending accounts allow employees to set aside before-tax dollars for medical and dependent care expenses.

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

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. What amount must Kevin include in income?

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

Which of the following is true regarding stock options?

Cornhusker Bank reimburses employees for dues to the local bankers association. The reimbursement is includible in the employee's income.

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

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

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

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 2016?

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.

Which of the following statements regarding compensation is false?

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?

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 false regarding dependent care expenses?

Taxable fringe benefits include automobile allowances, gym memberships, and personal use tickets to the theatre or sporting events.

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

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

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.