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Posted on Jul 17, 2024

Hunter received several types of non-cash fringe benefits in 2018 from his employer, most of which were provided free-of-charge to Hunter. Select from the choices

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Hunter received several types of non-cash fringe benefits in 2018 from his employer, most of which were provided free-of-charge to Hunter. Select from the choices below ONLY the options that include BOTH the correct TYPE of fringe benefit (i.e. taxable fringe benefits only) and the correct AMOUNT that will be added to Hunter's taxable wages on his Form W-2.

WARNING - there are certain types of fringe benefits that are repeated more than once in the list below. You should ONLY select the option that includes the proper amount of taxable wages with respect to that fringe benefit (assuming it is a taxable fringe benefit).

*If applicable, the 2018 Cost per $1,000 of Protection for 1 Month (based on Hunter's age of 45) = 0.15

*If applicable, the 2018 Qualified Transportation Fringe Benefit monthly qualified parking benefit limit = $260

Note - there are two or more correct answers listed below - please select ALL correct responses.

Check All That Apply

Employer-provided Health Insurance 2018 Taxable Wages = $1,440
Employer-provided Health Insurance 2018 Taxable Wages = $1,440
Employer-provided Health Insurance 2018 Taxable Wages = $2,160
Employer-provided Health Insurance 2018 Taxable Wages = $2,160
Accidental Death & Dismemberment Insurance ("AD&D") 2018 Taxable Wages = $180
Accidental Death & Dismemberment Insurance ("AD&D") 2018 Taxable Wages = $180
Fitness Facility Membership 2018 Taxable Wages = $816
Fitness Facility Membership 2018 Taxable Wages = $816
Employer-provided Business Phone 2018 Taxable Wages = $444
Employer-provided Business Phone 2018 Taxable Wages = $444
Basic Group-Term Life Insurance 2018 Taxable Wages = $90
Basic Group-Term Life Insurance 2018 Taxable Wages = $90
Supplemental Group-Term Life Insurance 2018 Taxable Wages = $660
Supplemental Group-Term Life Insurance 2018 Taxable Wages = $660
Supplemental Group-term Life Insurance 2018 Taxable Wages = $900
Supplemental Group-term Life Insurance 2018 Taxable Wages = $900
Supplemental Group-Term Life Insurance 2018 Taxable Wages = $240
Supplemental Group-Term Life Insurance 2018 Taxable Wages = $240
Employer-provided Lunches 2018 Taxable Wages = $1,352
Employer-provided Lunches 2018 Taxable Wages = $1,352
Employer-provided Lunches 2018 Taxable Wages = $676
Employer-provided Lunches 2018 Taxable Wages = $676
Qualified Parking2018 Taxable Wages = $3,900
Qualified Parking 2018 Taxable Wages = $3,900
Qualified Parking2018 Taxable Wages = $780
Qualified Parking 2018 Taxable Wages = $780
Qualified Parking 2018 Taxable Wages = $3,120

Hunter is a single 45-year-old who is employed by an engineering firm that includes a diverse array of taxable and nontaxable fringe benefits within the overall compensation package it offers its employees. Employees receive a base salary in addition to occasional incentive awards (i.e. bonuses); the incentive awards are often in the form of noncash perks. The company also offers different forms of equity-based compensation to reward its highest performing employees. Hunter does not itemize deductions, and he does not have any available tax credits or estimated tax payments. His employer withheld $23,668 from his paychecks for income tax withholding. Hunter's base salary for calendar-year 2018 was $101,350. He embarked on an all- expenses-paid 5-day Caribbean cruise in April 2018, which he received from his employer in lieu of a cash bonus. The cruise and related travel expenses would have cost Hunter $4,025 if had paid for the trip out-of-pocket. His employer agreed to give Hunter an extra $1,375 in cash to cover his tax liability on the value of the cruise (referred to as a "tax gross-up"). Tax gross-up payments are included on an employee's paycheck as ordinary wages subject to income and payroll taxes. Hunter also took advantage of the following pre-tax payroll deductions: Annual employee contribution to employer's 401(k) qualified plan = 6%* $101,350 base salary = $6,081/year (his employer provides a 75% match as well, i.e. $4,560.75/year) Annual employee contribution to a flexible spending account ("FSA") = $2,400/year Annual employee contribution to health insurance plan = $1,440/year . A summary of the above-mentioned compensation details is provided in the following table: Description Base salary Non-cash incentive award-all-expenses-paid cruise vacation Tax gross-up for the non-cash incentive award Payroll deduction - Employee 401(k) contributions Payroll deduction - Employee FSA contributions Payroll deduction - Employee portion of insurance premiums Income taxes withheld from paychecks 2018 Amount $101,350 $4,025 $1,375 $6,081 $2,400 $1,440 $23,668 Hunter is a highly-valued engineer at the company and thus has been rewarded quite handsomely the past few years with several equity-based compensation awards. In 2018 Hunter decided to sell 4,360 shares of stock that he received pursuant to the terms of these awards. Vest Date FMV/share a Grant (Exercise Price) $9.50 $11.30 $1175 $9.50 Type of Equity Section 83(b) Number of Options/Shares Grant Award Election? Date Granted Restricted Stock Yes 610 shares 1/1/2016 Restricted Stock No 950 shares 1/1/2017 Restricted Stock Yes 1225 shares 1712018 Nonqualified 100 options - 7 1/1/2016 Stock Options shares per option Nonqualified 200 options - 7 1/1/2017 shares per option Stock Options Incentive Stock 100 options - 7 1/1/2016 Options shares per option Incentive Stock 200 options - 7 1/1/2017 Options shares per option 1/1 2018 1/1/2018 1/1/2019 FMV/Share & Exercise FMV/Share a Number of Sales Vest Date Exercise Sale Date Proceeds per Shares Sold Share $11.75 610 5/12018 $17.50 $11.75 950 5/1/2018 $17.50 $10.90 $11.30 11/2017 $11.30 700 5/1/2018 $17.50 11/2017 $11.30 1/1/2018 $11.75 1/1/2018 $11.75 1,400 5/1/2018 $17.50 $9.50 11/2017 $11.30 11/2017 $11.30 700 5/1/2018 $17.50 $11.30 1/1/2018 $11.75 1/1/2018 $11.75 In addition to his base salary, incentive award, and equity-based compensation, Hunter also received the following taxable AND non-taxable fringe benefits from his employer during 2018: Company's Hunter's Annual Annual Cost Cost $2,160/year $1,440 year $180/year SO $816/year $0 Fringe Benefit Description The company offers health insurance to all employees. The monthly premium for Health each employee is $300, of which the company pays 60% and the employee pays insurance 40% via a pre-tax payroll deduction. *Hunter elected to receive health insurance coverage for 2018. Accidental death and dismemberment The company provides AD&D insurance to all employees, free-of-charge. ("AD&D") insurance The company offers a fitness facility membership" to all employees, free-of-charge. Fitness facility The fitness facility is not located on the company's business premises and is open to membership the general public "Hunter elected to receive a membership in the fitness facility for 2018. Employer- The company provides all engineers with a company phone, due to frequent after- provided cell hours client calls as well as the significant number of clients residing outside of the phone United States. Employees are not allowed to use their company phone to make personal calls Basic group- The company provides group-term life insurance ($50,000 policy) to all employees, term life insurance policy free-of-charge. The company offers supplemental group-term life insurance to all employees. The Supplemental supplemental life insurance coverage employees can elect is capped at 8 times their group-term life base salary or $500,000, whichever is lower. insurance policy Hunter elected to receive the maximum allowable $500,000 in supplemental life insurance for 2018. Employer- The company provides catered lunches to all employees on Mondays and provided meals Wednesdays, free-of-charge. The meals are furnished for the convenience of the company and are provided on the company's business premises. Qualified The company provides qualified parking access at a parking garage located on the parking company's business premises to all employees, free-of-charge. $444/year SO $90/year $0 $900/year $240/year $1,352/year SO $3,900/year ($325/month) $o Hunter is a single 45-year-old who is employed by an engineering firm that includes a diverse array of taxable and nontaxable fringe benefits within the overall compensation package it offers its employees. Employees receive a base salary in addition to occasional incentive awards (i.e. bonuses); the incentive awards are often in the form of noncash perks. The company also offers different forms of equity-based compensation to reward its highest performing employees. Hunter does not itemize deductions, and he does not have any available tax credits or estimated tax payments. His employer withheld $23,668 from his paychecks for income tax withholding. Hunter's base salary for calendar-year 2018 was $101,350. He embarked on an all- expenses-paid 5-day Caribbean cruise in April 2018, which he received from his employer in lieu of a cash bonus. The cruise and related travel expenses would have cost Hunter $4,025 if had paid for the trip out-of-pocket. His employer agreed to give Hunter an extra $1,375 in cash to cover his tax liability on the value of the cruise (referred to as a "tax gross-up"). Tax gross-up payments are included on an employee's paycheck as ordinary wages subject to income and payroll taxes. Hunter also took advantage of the following pre-tax payroll deductions: Annual employee contribution to employer's 401(k) qualified plan = 6%* $101,350 base salary = $6,081/year (his employer provides a 75% match as well, i.e. $4,560.75/year) Annual employee contribution to a flexible spending account ("FSA") = $2,400/year Annual employee contribution to health insurance plan = $1,440/year . A summary of the above-mentioned compensation details is provided in the following table: Description Base salary Non-cash incentive award-all-expenses-paid cruise vacation Tax gross-up for the non-cash incentive award Payroll deduction - Employee 401(k) contributions Payroll deduction - Employee FSA contributions Payroll deduction - Employee portion of insurance premiums Income taxes withheld from paychecks 2018 Amount $101,350 $4,025 $1,375 $6,081 $2,400 $1,440 $23,668 Hunter is a highly-valued engineer at the company and thus has been rewarded quite handsomely the past few years with several equity-based compensation awards. In 2018 Hunter decided to sell 4,360 shares of stock that he received pursuant to the terms of these awards. Vest Date FMV/share a Grant (Exercise Price) $9.50 $11.30 $1175 $9.50 Type of Equity Section 83(b) Number of Options/Shares Grant Award Election? Date Granted Restricted Stock Yes 610 shares 1/1/2016 Restricted Stock No 950 shares 1/1/2017 Restricted Stock Yes 1225 shares 1712018 Nonqualified 100 options - 7 1/1/2016 Stock Options shares per option Nonqualified 200 options - 7 1/1/2017 shares per option Stock Options Incentive Stock 100 options - 7 1/1/2016 Options shares per option Incentive Stock 200 options - 7 1/1/2017 Options shares per option 1/1 2018 1/1/2018 1/1/2019 FMV/Share & Exercise FMV/Share a Number of Sales Vest Date Exercise Sale Date Proceeds per Shares Sold Share $11.75 610 5/12018 $17.50 $11.75 950 5/1/2018 $17.50 $10.90 $11.30 11/2017 $11.30 700 5/1/2018 $17.50 11/2017 $11.30 1/1/2018 $11.75 1/1/2018 $11.75 1,400 5/1/2018 $17.50 $9.50 11/2017 $11.30 11/2017 $11.30 700 5/1/2018 $17.50 $11.30 1/1/2018 $11.75 1/1/2018 $11.75 In addition to his base salary, incentive award, and equity-based compensation, Hunter also received the following taxable AND non-taxable fringe benefits from his employer during 2018: Company's Hunter's Annual Annual Cost Cost $2,160/year $1,440 year $180/year SO $816/year $0 Fringe Benefit Description The company offers health insurance to all employees. The monthly premium for Health each employee is $300, of which the company pays 60% and the employee pays insurance 40% via a pre-tax payroll deduction. *Hunter elected to receive health insurance coverage for 2018. Accidental death and dismemberment The company provides AD&D insurance to all employees, free-of-charge. ("AD&D") insurance The company offers a fitness facility membership" to all employees, free-of-charge. Fitness facility The fitness facility is not located on the company's business premises and is open to membership the general public "Hunter elected to receive a membership in the fitness facility for 2018. Employer- The company provides all engineers with a company phone, due to frequent after- provided cell hours client calls as well as the significant number of clients residing outside of the phone United States. Employees are not allowed to use their company phone to make personal calls Basic group- The company provides group-term life insurance ($50,000 policy) to all employees, term life insurance policy free-of-charge. The company offers supplemental group-term life insurance to all employees. The Supplemental supplemental life insurance coverage employees can elect is capped at 8 times their group-term life base salary or $500,000, whichever is lower. insurance policy Hunter elected to receive the maximum allowable $500,000 in supplemental life insurance for 2018. Employer- The company provides catered lunches to all employees on Mondays and provided meals Wednesdays, free-of-charge. The meals are furnished for the convenience of the company and are provided on the company's business premises. Qualified The company provides qualified parking access at a parking garage located on the parking company's business premises to all employees, free-of-charge. $444/year SO $90/year $0 $900/year $240/year $1,352/year SO $3,900/year ($325/month) $o