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Exam 12: Compensation

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Question 41

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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:

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$9 per month. $200,0...

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Question 42

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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?

A) $0
B) $10,000
C) $20,000
D) $28,000

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

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Question 43

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Rick recently received 600 shares of restricted stock from his employer, Crazy Corporation, when the share price was $25 per share. Rick's restricted shares vested three years later, when the market price was $32. Rick held the shares for a little more than a year after vesting and sold them when the market price was $35. 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 35 percent, what is the amount of Rick's ordinary income amount and tax liability at the time of the income inclusion?

One primary purpose of equity compensation is to motivate employees.

Kaijsa received 20 NQOs (each option gives her the right to purchase 32 shares of stock for $8 per share)from her employer at the time she started working, when the stock price was $11 per share. Now that the share price is $18 per share, she intends to exercise all of her options. If Kaijsa holds the shares for two years and sells them when the market price is $25, what is the amount of the deduction and tax savings her employer will receive (assume the employer's marginal tax rate is 21 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 10 additional months 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 35 percent?

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

Hazel received 22 NQOs (each option gives her the right to purchase 10 shares of stock for $5 per share)at the time she started working, when the stock price was $16 per share. Now that the share price is $25 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 24 percent?

Which of the following is false regarding dependent-care expenses?

Which of the following is a fringe benefit that allows employers to discriminate among employees when providing it?

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 2020?

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

For 2020, up to $300 of transportation fringe benefits can be excluded from income.

Without an election, the income from an employee's restricted stock is measured on the grant date.

Annika's employer provides its employees with parking benefits. The fair market value of the annual parking benefit is $4,800 ($400 per month). What is the amount Annika must include into income with respect to her parking benefit in 2020?

Rick recently received 545 shares of restricted stock from his employer, Crazy Corporation, when the share price was $14 per share. Rick's restricted shares vested three years later, when the market price was $21. Rick held the shares for a little more than a year and sold them when the market price was $24. What is the amount of Rick's gain on the sale of the stock? Assuming a marginal tax rate of 37 percent, what is Rick's tax on the sale of the stock?

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

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

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

Raja received 20 NQOs (each option gives him the right to purchase 15 shares of stock for $10 per share)from his employer at the time he started working, when the stock price was $11 per share. Now that the share price is $20 per share, he intends to exercise all of the options using a same-day sale. What are Raja's after-tax proceeds from the sale if his marginal tax rate is 32 percent?