Chapter 4 HW Solutions

Chapter 4 HW Solutions - 2. Excessive Compensation...

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2. Excessive Compensation Solution: No. Jenny's excess $8,000 [($15 - $7) x 1,000 hours] salary over what other employees would earn is considered excessive compensation. The $8,000 would probably be reclassified as a dividend, treated as dividend income to Barbara (Jenny’s mother) but no longer deductible by the corporation. 4. Employee Fringe Benefits Solution: No. Anne has no income from these benefits because they are within the limits for exclusion. Under an educational assistance plan, up to $5,250 can be excluded; if the education qualifies as a working condition fringe benefit, there is no dollar limit on the exclusion. Parking valued at up to $230 per month can be excluded and up to $5,000 per year as a dependent care benefit can also be excluded. 7. Moving Expenses Solution: The employee can either (1) deduct the moving expenses on her year 1 tax return or (2) wait until the time requirement is satisfied and file an amended return for year 1. If the expenses are deducted in year 1 and the time requirement is not met, the
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Chapter 4 HW Solutions - 2. Excessive Compensation...

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