Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

Which of the following statements regarding restricted stock is false?

Accepted Answer

A) Like stock options,restricted stock has to vest before it can be sold. 
B) Like nonqualified stock options,the employee's income inclusion for restricted stock is the bargain element. 
C) Even if the value of restricted stock decreases from the price on the grant date,it retains some value to the employee. 
D) There is no effective tax planning elections for restricted stock.Employees are taxed on the fair market value of the restricted stock. 
A) Like stock options,restricted stock has to vest before it can be sold. 
B) Like nonqualified stock options,the employee's income inclusion for restricted stock is the bargain element. 
C) Even if the value of restricted stock decreases from the price on the grant date,it retains some value to the employee. 
D) There is no effective tax planning elections for restricted stock.Employees are taxed on the fair market value of the restricted stock.

Question 3

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.10 options × 10 shares × ($15 market price at exercise - $8 exercise price) . 
A) $0. 
B) $700. 
C) $900. 
D) $1,500. 
E) None of thesE.10 options × 10 shares × ($15 market price at exercise - $8 exercise price) .

Question 4

An employer always receives a deduction for total compensation paid to a CEO.Compensation must be reasonable to be deducted.

Accepted Answer

A) True 
 B)False

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

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.Employees may adjust the Form W-4 throughout the year. 
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.Employees may adjust the Form W-4 throughout the year.

Question 7

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.$200,000 policy less $50,000 exemption times 10 cents per month per thousand of coverage. 
A) $0. 
B) $15.00. 
C) $22.00. 
D) $58.33.$200,000 policy less $50,000 exemption times 10 cents per month per thousand of coverage.

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 2013,Tanya selected $3,000 of parking,$2,000 in 401(k) contributions,and $1,000 of cash.How much must Tanya include in taxable income?

Accepted Answer

A) $60. 
B) $1,000. 
C) $1,060. 
D) $4,000.$1,060 is includable: $60 of parking benefits [$3,000 - ($245 excludable amount × 12) ] and $1,000 of cash. 
A) $60. 
B) $1,000. 
C) $1,060. 
D) $4,000.$1,060 is includable: $60 of parking benefits [$3,000 - ($245 excludable amount × 12) ] and $1,000 of cash.

Question 9

An apartment manager can exclude the fair market value of free rent from his or her income.

Accepted Answer

A) True 
 B)False

Question 10

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.No tax effect is incurred by employees or employers on the grant date. 
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.No tax effect is incurred by employees or employers on the grant date.

Question 11

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 12

For 2013,up to $245 of qualified transportation fringe benefits can be excluded from income.

Accepted Answer

A) True 
 B)False

Question 13

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.$11,000 (1,000 shares × $11 market price on vesting date) . 
A) $0. 
B) $5,000. 
C) $8,000. 
D) $11,000.$11,000 (1,000 shares × $11 market price on vesting date) .

Question 14

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.$8,000 (1,000 shares × $8 market price on grant date) . 
A) $0. 
B) $5,000. 
C) $8,000. 
D) $11,000.$8,000 (1,000 shares × $8 market price on grant date) .

Question 15

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 doesn't exceed the average gross profit percentage of the employer's goods. 
C) The discount can be elected up to five times annually. 
D) The employer's actual price for the good sold is irrelevant.There is no limitation on the number of times the employees can use the discount. 
A) The discount relates to goods or services of the employer. 
B) The discount doesn't exceed the average gross profit percentage of the employer's goods. 
C) The discount can be elected up to five times annually. 
D) The employer's actual price for the good sold is irrelevant.There is no limitation on the number of times the employees can use the discount.

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

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 18

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

Accepted Answer

A) True 
 B)False

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

Which of the following statements regarding restricted stock is false?

An employer always receives a deduction for total compensation paid to a CEO.Compensation must be reasonable to be deducted.

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

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

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 2013,Tanya selected $3,000 of parking,$2,000 in 401(k) contributions,and $1,000 of cash.How much must Tanya include in taxable income?

An apartment manager can exclude the fair market value of free rent from his or her income.

Which of the following is true regarding stock options?

Which of the following statements regarding compensation is false?

For 2013,up to $245 of qualified transportation fringe benefits can be excluded from income.

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

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

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

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

An Introduction to Tax

Tax Compliance, the Irs, and Tax Authorities

Tax Planning Strategies and Related Limitations

Individual Tax Overview

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

Filters

Exam 12: Compensation

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

Which of the following statements regarding restricted stock is false?

An employer always receives a deduction for total compensation paid to a CEO.Compensation must be reasonable to be deducted.

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

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

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 2013,Tanya selected $3,000 of parking,$2,000 in 401(k) contributions,and $1,000 of cash.How much must Tanya include in taxable income?

An apartment manager can exclude the fair market value of free rent from his or her income.

Which of the following is true regarding stock options?

Which of the following statements regarding compensation is false?

For 2013,up to $245 of qualified transportation fringe benefits can be excluded from income.

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

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

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

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

An Introduction to Tax

Tax Compliance, the Irs, and Tax Authorities

Tax Planning Strategies and Related Limitations

Individual Tax Overview

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

Filters