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Exam 4: Employee Compensation

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Question 21

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Elizabeth received the following benefits from her employer this year: -$5,000 year-end bonus for exceeding sales expectations -$400 cash as a length-of-service award -$2,400 for insurance premiums paid by her employer for a disability income policy -$5,100 for tuition paid by her employer for courses not related to her job under an educational assistance plan How much must Elizabeth include in gross income?

A) $5,000
B) $5,400
C) $10,100
D) $12,900

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Question 22

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During 2019, Kyle has net income of $200,000 from consulting as an independent contractor.How much must Kyle pay for self-employment tax (rounded to the nearest dollar) ?

A) $30,600
B) $21,836
C) $21,722
D) $15,300
$\begin{array}{|l|r|r|}\hline \text { Social Security and Medicare Taxes } & \mathbf{2 0 1 9} & \mathbf{2 0 1 8} \\\hline \text { FICA Social Security tax rate } & 6.2 \% & 6.2 \% \\\hline \text { SECA Social Security tax rate } & 12.4 \% & 12.4 \% \\\hline \text { FICA Medicare tax rate } & 1.45 \% & 1.45 \% \\\hline \text { SECA Medicare tax rate } & 2.9 \% & 2.9 \% \\\hline \text { Social Security income limit } & \$ 132,900 & \$ 128,400 \\\hline \text { Medicare tax income limit } & \text { None } & \text { None } \\\hline \text { Total SECA rate below SS income limit } & 15.3 \% & 15.3 \% \\\hline \begin{array}{l}\text { Deductible SECA rate below SS income } \\\text { limit }\end{array} & 7.65 \% & 7.65 \% \\\hline\end{array}$

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Question 23

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Which of the following is a working condition fringe benefit?

Which of the following would not be considered a de minimis fringe benefit?

A rational taxpayer in the 25% tax bracket who wants health insurance would prefer the employer pay the $5,000 premium for this health insurance rather than receive a $5,000 increase in salary to purchase health insurance on his own.

Megan accepts an assignment working in Germany for the first 9 months of 2019 from Ferguson Corporation.Ferguson Corporation paid Megan's salary of $78,000 plus an additional $7,000 bonus.Megan paid $5,000 to the German government in taxes on this income.During 2019, Megan also earned $9,000 of interest income from corporate bonds and $4,000 of dividend income from U.S.corporations.The maximum foreign earned income exclusion for 2019 is $105,900.How much should Megan include in her gross income on her U.S.tax return for 2019?

All of the following are retirement plans that can be offered by a corporation except:

A person who qualifies for the foreign earned income exclusion can exclude $16,944 of paid housing costs from income.

George's cafeteria plan allows him to select fringe benefits equal to 10 percent of his annual salary of $75,000.Which of the following would be taxable if selected?

Tim is an employee of Lenux Corporation.Lenux purchased a car with a fair market value of $50,000 for use by Tim on his business trips.The annual lease-value of this vehicle is $13,250.In the current year, 70 percent of the miles driven by Tim in this vehicle were on business and 30 percent were for his personal use.How much, if any, taxable income does Tim have from his use of this vehicle?

Howard is a cash-basis, calendar-year taxpayer.He works for Clyde Corporation, an accrual-basis, calendar-year corporation.Clyde authorizes a $10,000 bonus for Howard on December 20, year 1.It pays the bonus on March 31 of year 2.Which of the following is correct?

Which of the following are characteristics of a Roth IRA?

Carol owns a small curio shop that is incorporated as an S corporation.Her three children, Sara, age 16, Mark, age 19, and Corey, age 22, all help in the shop.Which of the children's wages are subject to FICA taxes?

A U.S.citizen working in a foreign country with a higher tax rate on income than the U.S.tax rate, is usually better off claiming the foreign tax credit than the foreign earned income exclusion.

ABC Corporation awarded John 1,000 options in 2015; each option allows him to purchase one share of ABC Corporation stock for $20.The ABC stock is selling for $18 per share at the grant date.In 2017, John exercises the options when the stock's selling price was $40 per share.In 2019, John sells the stock for $50 per share.What is ABC Corporation's deduction if they are nonqualified stock options?

The Rabbi trust is a type of qualified retirement plan.

Jan has a company car for both business and personal use.Which of the following statements is correct regarding the use of the car?

An employee holiday party would be a tax-exempt de minimis fringe benefit.

Which of the following is a taxable fringe benefit when paid by the employer?

If a health plan is self-insured, highly-compensated employees are not affected by the nondiscrimination rules.