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Multiple Choice Quiz
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1
Employees complete a Form W-4 to specify their income tax withholding.
A)True
B)False
2
A section 83(b) election allows an employee to freeze the value of ordinary income on stock options at the grant date.
A)True
B)False
3
One purpose of Form W-2 is to determine an employee's withholding during the year.
A)True
B)False
4
The date on which stock options are awarded to an employee is called the vesting date.
A)True
B)False
5
The employee's income for restricted stock is typically measured on the date any restrictions lapse.
A)True
B)False
6
Hotel employees can receive free flights from an airline whose employees receive free hotel rooms.
A)True
B)False
7
A cafeteria plan allows employees to choose fringe benefits from a menu of options.
A)True
B)False
8
Which of the following forms is given to an employee and shows taxable wages and income tax withholding?
A)Form I-9.
B)Form W-2.
C)Form W-4.
D)Form 1099.
9
Which of the following isn't done by Form W-2?
A)Summarizes the employee's taxable salary and wages.
B)Provides annual Federal and state withholding information.
C)Indicates how many exemptions an employee claimed.
D)Generated by an employer annually.
10
Which of the following statements is true regarding equity compensation?
A)Restricted stock maintains value to an employee even when the market price decreases after grant date.
B)NQOs maintain value to an employee even when the market price decreases after grant date.
C)Employees usually prefer NQOs rather than ISOs.
D)The difference between the market value and the strike price is treated as ordinary income on the exercise date for ISOs.
11
Sweet Sarah received 10 NQOs (each option gives her the right to purchase 20 shares of stock for $5 per share) from her employer at the time she started working the stock price was $7 per share. Now that the share price is $20 per share, she intends to exercise all of the options. Two years later Sweet Sarah sells the stock for $22 per share, what is Sweet Sarah's basis in her stock for purposes of calculating the gain or loss?
A)$1,000.
B)$1,400.
C)$4,000.
D)$4,400.
12
Jill was granted 1,000 shares of restricted stock when she joined the company. The share price was $6 on the date of grant, $9 when the restrictions lapsed, and $15 when the she disposed of the stock. No section 83(b) election was made. What is the amount and character of Jill's income on the date the restrictions lapse?
A)$6,000 ordinary gain.
B)$9,000 capital gain.
C)$9,000 ordinary gain.
D)$6,000 ordinary gain and $3,000 capital gain.
E)None of the above.
13
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 incentive stock options, the employee's income inclusion (the bargain element) occurs when the stock is sold.
C)Even if the value of restricted stock decreases from the price on the grant date, it retains some value to employee.
D)There is no effective tax planning elections for restricted stock.
14
Which of the following does not qualify as a "for the convenience of the employer" nontaxable fringe benefit?
A)The fair market value of the rent of an apartment manager living on the premises.
B)An overtime meal provided to an employee while working late.
C)A meal provided by a hospital to residents during their shift.
D)A meal at a holiday party.
15
Rachel receives reimbursement from her employer for dependent care expenses for up to $10,000. Rachel applies for and receives reimbursement of $7,000 for her 1 year old son. How much, if any, is includible in her income?
A)$0.
B)$2,000.
C)$5,000.
D)$7,000.





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