FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 12: Compensation

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 21

True/False

Review LaterAdd Note

Review Later

Employers cannot discriminate between highly and non-highly compensated employees when providing taxable fringe benefits.

A) True
B) False

Correct Answer

verified

Show Answer

Question 22

True/False

Review LaterAdd Note

Review Later

When stock options are exercised they are converted into actual employer stock.

A) True
B) False

Correct Answer

verified

Show Answer

Question 23

True/False

Review LaterAdd Note

Stock options will always provide employees with future compensation.

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?

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

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?

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 toreceive 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.)

on the entire amount, and the employer ________ allowed a deduction on the entire amount.

A section 83(b) election freezes the value of restricted stock for compensation purposes on the vesting date.

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

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 ordinary income amount and tax liability at the time of the incomeinclusion?

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

Big Bucks, a publicly-traded corporation, paid its CEO $1,500,000 of base compensation for the year. What is the after-tax cost of paying the salary assuming a 30 percent marginal tax rate?

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 income will Hazel recognize on the exercise date and how much tax will she pay assuming her marginal tax rate is 25 percent?

Suzanne received 20 ISOs (each option gives her the right to purchase 20 shares of stock for $12 per share) at the time she started working when the stock price was $13 per share. Three years later, when the share price was $23 per share, she exercised all of her options. If Suzanne holds the shares for two additional years and sells them when the market price is $30, how much gain will Suzanne recognize on the sale and how much tax will she pay assuming her marginal tax rate is 39.6 percent?

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

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

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

Which of the following statements regarding restricted stock is false?

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