Charlie was hired by Ajax this year as a corporate executive and a member of the board of directors During the current year, Charlie received the following payments or benefits paid on his behalf Salary payments $ 140,500 Contributions to qualified pension plan 10,300 Qualified health insurance premiums 12,150 Year end bonus 13,900 Annual directors fee 19,100 Group term life insurance premiums (face $40,000) 865 Whole life insurance premiums (face $100,000) 1,810 Disability insurance premiums (no special elections) 5,050 a Charlie uses the cash method and calendar year for tax purposes Calculate Charlies gross income for the current year b Suppose that Ajax agrees to pay Charlie an additional $172,000 once Charlie completes five years of employment Will this agreement alter Charlies gross income this year relative to your part (a) answer Yes No c Suppose that in exchange for his promise to remain with the firm for the next four years, Ajax paid Charlie four years of directors fees in advance Will this arrangement alter Charlies gross income this year relative to your part (a) answer Yes No d Assume that in lieu of a year end bonus Ajax transferred 1,390 shares of Bell stock to Charlie as compensation Further assume that the stock was listed at $34 per share and Charlie would sell the shares by year end, at which time he expected the price to be $38 per share Calculate the value of compensation Charlie would report and gain on the sale that would be included in Charlie's gross income e Suppose that in lieu of a year end bonus Ajax made Charlies house payments (a total of $30,000) Calculate the value of the house payments Charlie would report as income

The Answer is in the image, click to view ...

Answered step by step

Verified Expert Solution

Link Copied!

Question

1 Approved Answer

Posted on Jul 03, 2024

Charlie was hired by Ajax this year as a corporate executive and a member of the board of directors. During the current year, Charlie received

Charlie was hired by Ajax this year as a corporate executive and a member of the board of directors. During the current year, Charlie received the following payments or benefits paid on his behalf.


Salary payments	$	140,500
Contributions to qualified pension plan		10,300
Qualified health insurance premiums		12,150
Year-end bonus		13,900
Annual directors fee		19,100
Group-term life insurance premiums (face = $40,000)		865
Whole life insurance premiums (face = $100,000)		1,810
Disability insurance premiums (no special elections)		5,050

a. Charlie uses the cash method and calendar year for tax purposes. Calculate Charlies gross income for the current year.

b. Suppose that Ajax agrees to pay Charlie an additional $172,000 once Charlie completes five years of employment. Will this agreement alter Charlies gross income this year relative to your part (a) answer?

	Yes
	No

c. Suppose that in exchange for his promise to remain with the firm for the next four years, Ajax paid Charlie four years of directors fees in advance. Will this arrangement alter Charlies gross income this year relative to your part (a) answer?

	Yes
	No

d. Assume that in lieu of a year-end bonus Ajax transferred 1,390 shares of Bell stock to Charlie as compensation. Further assume that the stock was listed at $34 per share and Charlie would sell the shares by year-end, at which time he expected the price to be $38 per share. Calculate the value of compensation Charlie would report and gain on the sale that would be included in Charlie's gross income.

e. Suppose that in lieu of a year-end bonus Ajax made Charlies house payments (a total of $30,000). Calculate the value of the house payments Charlie would report as income.