Question 1

Annika's employer provides only its executives with parking benefits. The fair market value of the annual parking benefit is $4,800. What is the amount Annika must include into income with respect to her parking benefit in 2014?

Accepted Answer

The answer of Annika's employer provides only its executives with...

Question 2

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

Accepted Answer

A) True 
 B)False

Question 3

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 cash elected is treated at taxable compensation. 
D)  All of these are true statements.

Question 4

Employers computing taxable income under the accrual method may deduct wages accrued as compensation expense in one year and paid in the subsequent year, as long as the company makes the payment within 2½ months after the employer's year-end.

Accepted Answer

A) True 
 B)False

Question 5

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.

Question 6

Group-term life insurance is a fringe benefit that can be partially taxable and partially tax free.

Accepted Answer

A) True 
 B)False

Question 7

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. What is the amount of Rick's compensation income if Rick made an election under section 83(b) when the stock was granted? Assuming a marginal tax rate of 30 percent, what is the amount of Rick's income inclusion and tax liability at the time of the income inclusion?

Accepted Answer

The answer of Rick recently received 500 shares of restricted...

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

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, what is the amount of Rick's income inclusion and tax liability upon the sale of the stock?

Accepted Answer

The answer of Rick recently received 500 shares of restricted...

Question 10

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 11

Which of the following is not an example of a nontaxable fringe benefit?

Accepted Answer

A)  Monthly employer provided transit benefit of $100. 
B)  Group-term life insurance policy providing $100,000 of coverage. 
C)  Employer provided parking of $100 per month. 
D)  Qualified employee discounts.

Question 12

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 13

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 2014?

Accepted Answer

The answer of Annika's employer provides each employee with up...

Question 14

One purpose of Form W-4 is to determine an employee's withholding.

Accepted Answer

A) True 
 B)False

Question 15

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.

Question 16

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.

Question 17

Which of the following refers to the date stock options are awarded to an employee?

Accepted Answer

A)  Grant date. 
B)  Exercise date. 
C)  Lapse date. 
D)  Vesting date.

Question 18

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. If Hazel holds the shares for two years and sells them when the market price is $25, how much gain will Hazel recognize on the sale 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 19

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

Accepted Answer

A) True 
 B)False

Question 20

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). Because of group discounts, her employer can purchase the insurance for $6,000. Lina's employer has a 30 percent marginal tax rate. What would be the after-tax cost to Lina's employer to provide her with health insurance?

Accepted Answer

The answer of Lina, a single taxpayer with a 35...

Exam 12: Compensation

Annika's employer provides only its executives with parking benefits. The fair market value of the annual parking benefit is $4,800. What is the amount Annika must include into income with respect to her parking benefit in 2014?

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

Which of the following statements concerning cafeteria plans is true?

Employers computing taxable income under the accrual method may deduct wages accrued as compensation expense in one year and paid in the subsequent year, as long as the company makes the payment within 2½ months after the employer's year-end.

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

Group-term life insurance is a fringe benefit that can be partially taxable and partially tax free.

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

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?

Which of the following is not an example of a nontaxable 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)?

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 2014?

One purpose of Form W-4 is to determine an employee's withholding.

Which of the following is true regarding stock options?

Which of the following refers to the date stock options are awarded to an employee?

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