QUESTION 15 Which of the following statements is correct All FICA taxes are paid by the employer The employee pays one half of the FUTA tax The employer pays the FUTA tax and the employers share of the FICA tax The employee pays the FUTA tax and the employees share of the FICA tax Donna is President of and owns 100 percent of DAV Enterprises, a cash basis, calendar year corporation The company has always been profitable but over the last five years Wilmas salary has increased from over $400,000 per year to over $1,000,000 and it has failed to pay dividends Which of the following will not occur if the IRS determines that $500,000 of her salary is unreasonable Donna will pay an additional tax on the $500,000 recharacterized as dividend Wilma will be eligible for a refund of Medicare taxes WT will lose a deduction for the $500,000 recharacterized as a dividend WT will be eligible for a refund of a portion of FICA taxes it paid Five years ago, Anna Corp granted Susan nonqualified stock options to buy 1,000 shares of Anna Corp stock at $22 per share exercisable for six years At the date of grant, the stock was selling for $19 per share Susan exercised the options this year when the market price was $28 per share How much income must Laura recognize from the exercise of the options zero $3,000 $6,000 $22,000

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QUESTION 15 Which of the following statements is correct? All FICA taxes are paid by the employer. The employee pays one-half of the FUTA tax.

QUESTION 15

Which of the following statements is correct?

		All FICA taxes are paid by the employer.
		The employee pays one-half of the FUTA tax.
		The employer pays the FUTA tax and the employers share of the FICA tax.
		The employee pays the FUTA tax and the employees share of the FICA tax.

Donna is President of and owns 100 percent of DAV Enterprises, a cash-basis, calendar-year corporation. The company has always been profitable but over the last five years Wilmas salary has increased from over $400,000 per year to over $1,000,000 and it has failed to pay dividends. Which of the following will not occur if the IRS determines that $500,000 of her salary is unreasonable?

		Donna will pay an additional tax on the $500,000 recharacterized as dividend.
		Wilma will be eligible for a refund of Medicare taxes.
		WT will lose a deduction for the $500,000 recharacterized as a dividend.
		WT will be eligible for a refund of a portion of FICA taxes it paid.

Five years ago, Anna Corp. granted Susan nonqualified stock options to buy 1,000 shares of Anna Corp. stock at $22 per share exercisable for six years. At the date of grant, the stock was selling for $19 per share. Susan exercised the options this year when the market price was $28 per share. How much income must Laura recognize from the exercise of the options?

zero

$3,000

$6,000

$22,000