The company has little or no out of pocket cost with

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(4) the company has little or no out-of-pocket cost with an ISO A. (1) only B. (1) and (2) only C. (1) (2) and (3) only D. (2) (3) and (4) only
5. The incentive stock option (ISO) provides greater deferral of taxes to the executive than a nonstatutory stock option.
6. Only the first $_____ worth of ISO stock granted any one employee is entitled to favorable tax treatment.
7. An employee stock purchase plan generates little to no out-of-pocket cost to the company.
8. Hugh Green’s employer, Jolly Foods, granted Hugh a stock option under its employee stock purchase plan to buy 200 shares of Jolly Foods stock for $10 per share when the market price was $13 per share. A year and a half later, when the stock had a value of $15 per share, Hugh exercised his option. Fourteen months later, when the stock was $17 per share, Hugh sold his stock. In the year of sale, Hugh had to report _____ as wages and _____ as capital gains. A. $600, $800 B. $600, $1400
C. $1,000, $400 D. $300, $1,100 E. $1,100, $400 9. At what point does an employer normally receive a tax deduction for a restricted stock plan?
10. Employers can use a restricted stock plan to reduce the chance that a savvy executive would learn trade secrets and then go to work for a competitor.
11. Hank Zetter is an executive at Marco Fashions. Marco Fashions has given Hank a restricted stock plan that states if he fails to achieve $500,000 in sales each quarter for the next 10 years, he forfeits his claim on the stock in the plan. The IRS would view this provision as a substantial risk of forfeiture.
12. Cafeteria plans must include a cash option. A. True B. False
13. Because of administrative costs and complexity, cafeteria plans generally are used by larger employers.

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