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Exam 12: Compensation

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Question 41

True/False

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

A) True
B) False

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Question 42

Multiple Choice

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Bonnie's employer provides her with an annual dinner club membership costing $5,000. Her marginal tax rate is 24 percent. Her employer has a marginal tax rate of 21 percent. What is Bonnie's after-tax benefit?

A) $0.
B) $1,200.
C) $3,800.
D) $5,000.

E) A) and B)
F) A) and C)

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Question 43

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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 and sold them when the market price was $15. What is the amount of Rick's income on the vesting date? Assuming a marginal tax rate of 32 percent, what is Rick's tax on the restricted stock?

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?

Which of the items is not correct regarding withholding?

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

An employer always receives a deduction for total compensation paid to a CEO.

An employee can indicate whether they want an additional amount withheld for payroll taxes on the Form W-4.

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

Hope'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 Hope's employer $700 to provide this amount of insurance to Hope each year. Assuming that Hope is 27 years old, use the table to determine the monthly premium that Hope must include in income as a result of receiving the group-term life benefit? EXHIBIT 12-10 Uniform Premiums for $1,000 of Group-Term Life Insurance Protection

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

Which of the following is not a purpose of equity-based compensation?

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?

The date on which stock options are given to the employee is called the exercise date.

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

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 and that his marginal tax rate is 24 percent, what is the amount of Rick's income inclusion and tax liability upon the sale of the stock?

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

Which of the following statements regarding income tax withholding is incorrect?

One primary purpose of equity compensation is to motivate employees.

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