CEP Tax Planning & Compliance 5

Question 1

Under the mobile workforce / multi-state taxation rules, an employee who works in multiple states during an RSU vesting period is typically taxed by each state based on:

Accepted Answer

The portion of the vesting period the employee worked in that state (apportionment)

Answer

Only the state of residence at the vesting date

Answer

Only the state where corporate headquarters is located

Answer

No state income tax applies to equity compensation

Question 2

A U.S. citizen employed abroad by a U.S. company exercises NQSOs. Under the foreign earned income exclusion (Section 911), the NQSO spread:

Accepted Answer

Cannot be excluded under Section 911 if the options relate to services performed in the U.S.

Answer

Is always fully excludable as foreign earned income

Answer

Is treated as capital gain and not subject to Section 911 limits

Answer

Is always fully taxable in the U.S. regardless of where services were performed

Question 3

When a foreign national employee is granted U.S. stock options and later returns to their home country before exercise, the tax sourcing of income typically follows:

Accepted Answer

A proration based on U.S. workdays during the vesting period versus total vesting period workdays

Answer

The employee's country of residence at time of exercise exclusively

Answer

A fixed 50/50 split between the U.S. and home country

Answer

The country where the employing entity is incorporated

Question 4

Under FBAR (FinCEN 114) reporting rules, a U.S. person holding equity in a foreign company through a broker account must file if:

Accepted Answer

The account value exceeds $10,000 at any time during the calendar year

Answer

They receive dividends exceeding $1,000 from foreign stock

Answer

Their total foreign income exceeds the Section 911 limit

Answer

They exercise more than 1,000 foreign stock options per year

Question 5

A company doing a cashless (same-day-sale) NQSO exercise for a departing nonresident alien employee must withhold:

Accepted Answer

30% (or lower treaty rate) on the U.S.-source portion of the spread

Answer

No withholding applies to nonresident aliens on equity compensation

Answer

Only FICA taxes, not federal income tax

Answer

Flat 22% supplemental withholding regardless of treaty status

Question 6

Under the constructive receipt doctrine, a voluntary deferral election for an RSU must generally be made:

Accepted Answer

Within 30 days after RSU grant, before a substantial risk of forfeiture is established

Answer

At any time before the RSU vesting date

Answer

At least 12 months before the vesting date for compliance with Section 409A

Answer

After receiving approval from the Compensation Committee

Question 7

For equity awards subject to U.S. backup withholding, the applicable rate as of 2024 is:

Accepted Answer

24%

Answer

10%

Answer

28%

Answer

37%