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Exam 12: Compensation

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Question 31

True/False

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Employers receive a deduction for compensation paid to and employment taxes paid onbehalf of employees.

A) True
B) False

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Question 32

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A cafeteria plan provides employees discounted meals at a company sponsored dining room.

A) True
B) False

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Question 33

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An employee's income with respect to restricted stock is the fair market value on the vesting date.

Tasha receives reimbursement from her employer for dependent care expenses for up to$8,000. Tasha applies for and receives reimbursement of $6,000 for her 10-year-old son. How much, if any, is includible in her income?

Which of the following statements is true regarding the $1,000,000 limit on covered employees for publicly-traded companies?

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?

Which of the following statements concerning cafeteria plans is true?

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?

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

Which of the following statements regarding employer provided educational benefits is true?

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?

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 Marenrecognize on the sale of the shares and how much tax will she pay assuming her marginal tax rate is 39.6 percent?

Qualified employee discounts allow employees to purchase employer goods at a discount.

Which of the following items is not included on an employee's Form W-2?

Annika's employer provides each employee with up to $200 of monthly vouchers for publictransportation. What is the amount that Annika must include into income with respect to her benefit in 2017?

Health insurance is an example of a nontaxable fringe benefit.

Aharon exercises 10 stock options awarded several years ago. The following information pertains to the options: (1) each option gives the employee the right to buy 10 shares, (2) the market price on the grant date was $7, (3) the strike price is $10, and (4) the market price on the exercise date was $15. How much will it cost Aharon to purchase theoptions on the exercise date?

Lara, a single taxpayer with a 30 percent marginal tax rate, desires health insurance. The health insurance would cost Lara $5,000 to purchase if she pays for it herself (Lara's AGI is too high to receive any tax deduction for the insurance as a medical expense) . Lara's employer has a 40 percent marginal tax rate. Ignoring payroll taxes, what is themaximum amount of before-tax salary Lara would give up to receive health insurance?(Round your answer to the nearest whole number)

Stevie recently received 1,000 shares of restricted stock from her employer, NicksCorporation, when the share price was $8 per share. Stevie's restricted shares vestedthree 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?

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, heremployer 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?