Problem 12-23 (LO 12-1) (Algo) North incorporated is a calendar-year C corporation, acerual-basis taxpayet, At the end of year 1, North accrued anid deducted the foliowing bonuses for certain employees for financial accounting purposes. - $13,550 for Lisa Tanaka, a 30 percent shareholder: - \$12,500 for Jared Zabaski, a 35 percent shareholdet - $15,000 for Helen Talanian, a 20 percent shareholdet. - $8,600 for Steve Nielson, o percent sthareholder. Uniess stated otherwise, assume these shareholders are unrelated. How much of the accrued bonuses can North incorporated deduct in year 1 under the following alternative scenarios? Note: Leave no answer blank, Enter zero if applicable. Input all amounts as positive values. Required: a. North paid the bonuses to the employees on March 1 of year 2 . b. North paid the bonuses to the employees on April 1 of year 2 c. North paid the bonuses to employees on March 1 of year 2 and Lisa and Jared are related to each other, so they are treated as owning each other's stock in North: d. North paid the bonuses to employees on Mach 1 of year 2 and Lise and Helen are related to each other, so they are treated as owning each ofher's stock in North. Lynette is the CEO of publicly traded TTT Corporation and earns a salary of $255,000 in the current year. What is TTT Corporation's after-tax cost of paying Lynette's salary excluding FICA taxes? Problem 12-28 (LO 12-2) (Algo) Yost received 300 NCOs (each option gives. Yost the night to purchase 10 shares of Cutter Corporation stock for $40 per share). At the time he started working for Cutter Corporation three years ago, Cutter's stock price was $40 per share. Yost excrcised all of his options when the share price was $80 per share. Two years after acquiring the shares, he sold them at $122 per share. Note: Input all amounts as positive values. Leave no answer blank. Enter zero if applicoble. Required: a. What are Yost's taxes due on the grant date, exerise dete, and sale dste, assuming his ordinary marginal rate is 35 percent and his long-term capial gains rate is 15 percent? b. What are Cutter Corporation's tax consequences famount of deduction and tax savings from deduction) on the grant date, the exercise dote, and the date Yost sold the shares? c. Assume that Yost is "cash poor" and needs to engage in a same doy sale in order to buy his shares. Due to his beliet that the stock price is going to increase signiticantly, he wants to maintain as many shares as possible. How many shares must he sell in order to cover bis purchose price and taxes poyable on the exereise? d. Assume that Yosts options were exercisable ot 545 and expired after five years. It the stock only reoched $43 during its high peint during the five-year period, what are Yost's tax consequences on the grant date, the exorcise dote, and the date the shares are sold, assuming his ordinary marginal rate is 35 percent and his long-term capital gains rate is 15 percent? Mark recelved 10 ISOs (each option gives him the right to purchase 16 shares of Hendrieks Corporation stock for $9 per share) at the time he started working for Hendricks Corporation fivo years ago, when Hendricks's stock price was $5 per share. Now that Hondricks's share price is $35 per share, Mark intends to exercise all of his options and hold all of his shares for more than one year. Assume that more than a year after exercise, Mark sells the stock for $35 a share. Note: Enter all amounts as positive values. Leave no answers blank. Enter zero if applicable. Required: a. What are Mark's taxes due on the grant date, the exereiso date, and the date he setis the shares, assuming his ordinary marginal rate is 32 porcent and his long torm capital gains rate is 15 percent? b. What are Hendricks's tax consequences on the grant date, the exercise date, and the date Mark sells the shares? Complete this question by entering your answers in the tabs below. What are Mark's taxes due on the grart date, the exercise date, and the date he sels the shares, assuming his ordinary maeginal rate is 32 percent and his long term cogadal gains rate is 15 percent? On May 1, year 1, Anno received 5,100 shares of restricted stock from her employet, Jarbal Corporation. On that date, the stock price was $5 per share. On receiving the restricted stock, Anna made an 83 (b) election. Anna's restricted shares will all vest on Moy 1 , year 3. Afler the shares vest, she intends to sell them immediately to purchase a condo. True to her plan, Anna sold the shares immediately after they vested. Note: Leave no answers blank. Enter zero if applicable. Required: a. What is Anna's ordinary income in year 1 ? b. What is Anno's gain or loss in year 3 t the stock is valued at 53.00 per share on the day the shares vest? c. What is Anna's gain or loss in year 3 if the stock is valued at $7.00 per share on the day the shares vest? d. What is Anna's gain or loss in year 3 it the stock is valued at 55 per share on the day the shares vest? Complete this question by entering your answars in the tabs below. What is Anna's ordinary income in year 13? Nicole's employer, Poe Corporation, provides her with an automobile allowance of $22,000 every other year, Her marginal tax rate is 32 percent. Answer the following questions relating to this fringe benefit Required: a. What is Nicole's after-tax benefit if she receives the allowance this year? b. What is Poe's after-tax cost of providing the auto allowance? Complete this question by entering your answers in the tabs below. What is Nicole's artentax benefit if she receives the allowance this year? Problem 12-41 (LO 12-3) (Algo) Seiko's current salary is $87,500. Her marginal tax rate is 32 percent, and she fancies European sports cars. She purchases a new auto each year. Seiko is currently a manager for ldaho Office Supply. Her friend, knowing of her interest in sports cars, tells her about a manager position at the local BMW and Porsche dealer. The new position pays $80,000 per year, but it allows employees to purchase one new car per year at a discount of $19,100. This discount qualifies as a nontaxable fringe benefit in an effort to keep Seiko as an. Required: What is the annual after-tax cost to idaho Office Supply if it provides Selko with the $18,100 increase in salary? Note: Ignore payroll taxes. b-1. Financially, which offer is better for Seiko on an aftertax basis? b-2. By how much is the offer better for Seiko on an affer tax basis? (Assume that Seiko is going to purchase the new car whether she switches jobs or not] c. What salary would Seiko need to recelve from Idaho Orfice Supply to moke her financially indifferent (after taxes) between receiving additional salary from ldaho Otfice Supply and accepting a position at the auto dealership? Note: Round your intermediate computations to the nearest dollar amount. Problem 12-47 (LO 12-3) (Algo) LaMont works for a company in downtown Chicago. The company encourages employees to use public transportation fo save the environment) by providing them with transit passes at a cost of $292 per month Required: a. If LaMant receives one pass (worth $292 ) each month, haw much of this benefit must he include in his gross income each year? b. If the company provides each employee with $292 per month in parking benefits, how much of the parking benent must LaMont include in his gross income each yoar
