Question 1. Melody works for a company with only 22 employee

1. Melody works for a company with only 22 employees. Her employer contributed $2,000 to her health savings account (HSA), and the account earned $100 in interest during the year. Melody withdrew only $1,200 to pay medical expenses during the year. Melody is notrequired to recognize any gross income from the HSA for the year.

a. True

b. False

.

2. If an employer pays for the employee’s long­term care insurance premiums, the employee can exclude from gross income the premiums but all of the benefits collected must be included in gross income.

a. True

b. False

.

3. Employees of a CPA firm located in Maryland may exclude from gross income the meals and lodging provided by the employer while they were on an audit in Delaware.

a. True

b. False

4. Carla is a deputy sheriff. Her employer requires that she live in the county where she is employed. Housing is very expensive; so the county agreed to pay her $4,800 per year to cover the higher cost of housing. Carla must include the housing supplement in her gross income.

a. True

b. False

5. Roger is in the 35% marginal tax bracket. Roger’s employer has created a flexible spending account for medical and dental expenses that are not covered by the company’s health insurance plan. Roger had his salary reduced by $1,200 during the year for contributions to the flexible spending plan. However, Roger incurred only $1,100 in actual expenses for which he was reimbursed. Under the plan, he must forfeit the $100 unused amount. His after-tax cost of overfunding the plan is $65.

a. True

b. False

6. Mauve Company permits employees to occasionally use the copying machine for personal purposes. The copying machine is located in the office where the higher paid executives work, so they occasionally use the machine. However, the machine is not convenient for use by the lower paid warehouse employees and, thus, they never use the copier. The use of the copy machine may not be excluded from gross income because the benefit is discriminatory.

a. True

b. False

7. Fresh Bakery often has unsold donuts at the end of the day. The bakery allows employees to take the leftovers home. The employees are notrequired to recognize gross income because the bakery does not incur any additional cost.

a. True

b. False

8. Nicole’s employer pays her $150 per month towards the cost of parking near a railway station where Nicole catches the train to work. The employer also pays the cost of the rail pass, $75 per month. Nicole can exclude both of these payments from her gross income.

a. True

b. False

9. A U.S. citizen who works in France from February 1, 2014 until January 31, 2015 is eligible for the foreign earned income exclusion in 2014 and 2015.

a. True

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