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For 2013,up to $245 of qualified transportation fringe benefits can be excluded from income.

A) True
B) False

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Stevie recently received 1,000 shares of restricted stock from her employer,Nicks Corporation,when the share price was $8 per share.Stevie's restricted shares vested three 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.Assuming Stevie made a section 83(b) election,what is the amount of Stevie's ordinary income with respect to the restricted stock?


A) $0.
B) $5,000.
C) $8,000.
D) $11,000.$8,000 (1,000 shares × $8 market price on grant date) .

E) None of the above
F) A) and C)

Correct Answer

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An employer always receives a deduction for total compensation paid to a CEO.Compensation must be reasonable to be deducted.

A) True
B) False

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Grace'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 Grace's employer $700 to provide this amount of insurance to Grace each year.Assuming that Grace is 43 years old,use the table to determine the monthly premium that Grace must include in income as a result of receiving the group-term life benefit? Grace'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 Grace's employer $700 to provide this amount of insurance to Grace each year.Assuming that Grace is 43 years old,use the table to determine the monthly premium that Grace must include in income as a result of receiving the group-term life benefit? A) $0. B) $15.00. C) $22.00. D) $58.33.$200,000 policy less $50,000 exemption times 10 cents per month per thousand of coverage.


A) $0.
B) $15.00.
C) $22.00.
D) $58.33.$200,000 policy less $50,000 exemption times 10 cents per month per thousand of coverage.

E) A) and C)
F) None of the above

Correct Answer

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Tanya's employer offers a cafeteria plan that allows employees to choose among a number of benefits.Each employee is allowed $6,000 in benefits.For 2013,Tanya selected $3,000 of parking,$2,000 in 401(k) contributions,and $1,000 of cash.How much must Tanya include in taxable income?


A) $60.
B) $1,000.
C) $1,060.
D) $4,000.$1,060 is includable: $60 of parking benefits [$3,000 - ($245 excludable amount × 12) ] and $1,000 of cash.

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

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Current compensation is usually comprised of salary,wages,and bonuses.

A) True
B) False

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

A) True
B) False

Correct Answer

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


A) The discount relates to goods or services of the employer.
B) The discount doesn't exceed the average gross profit percentage of the employer's goods.
C) The discount can be elected up to five times annually.
D) The employer's actual price for the good sold is irrelevant.There is no limitation on the number of times the employees can use the discount.

E) All of the above
F) B) and D)

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Which of the following is true regarding stock options?


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.No tax effect is incurred by employees or employers on the grant date.

E) A) and D)
F) All of the above

Correct Answer

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

A) True
B) False

Correct Answer

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


A) Determines an employee's income tax withholding.
B) Employees can claim more allowances than personal exemptions that will be claimed.
C) Employees can specify additional amounts to be withheld each month.
D) The form can only be adjusted at the beginning of year or start of employment.Employees may adjust the Form W-4 throughout the year.

E) A) and D)
F) B) and D)

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Which of the following statements regarding restricted stock is false?


A) Like stock options,restricted stock has to vest before it can be sold.
B) Like nonqualified stock options,the employee's income inclusion for restricted stock is the bargain element.
C) Even if the value of restricted stock decreases from the price on the grant date,it retains some value to the employee.
D) There is no effective tax planning elections for restricted stock.Employees are taxed on the fair market value of the restricted stock.

E) A) and D)
F) All of the above

Correct Answer

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An apartment manager can exclude the fair market value of free rent from his or her income.

A) True
B) False

Correct Answer

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

A) True
B) False

Correct Answer

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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?


A) $0.
B) $700.
C) $900.
D) $1,500.
E) None of thesE.10 options × 10 shares × ($15 market price at exercise - $8 exercise price) .

F) C) and E)
G) A) and D)

Correct Answer

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

A) True
B) False

Correct Answer

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Which of the following statements regarding compensation is false?


A) Wages are usually paid by the hour
B) Salary is usually a form of fixed compensation
C) Bonuses are a form of compensation obtained if certain criteria are met
D) Bonuses paid within 2½ months of year end are included in employee's compensation in the year they were earned.Employees include compensation into income in the year received.

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

Correct Answer

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


A) $0.
B) $5,000.
C) $8,000.
D) $11,000.$11,000 (1,000 shares × $11 market price on vesting date) .

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

Correct Answer

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