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

Most states apportion RSU income based on the number of days (or portion of the vesting period) worked within that state, regardless of the employee's residency at vesting.

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

Section 911 excludes foreign earned income, but only the portion of the NQSO spread attributable to services performed outside the U.S. while a bona fide foreign resident qualifies.

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

U.S. tax treaties and IRS guidance generally source option income to the country where services were performed during the vesting period, requiring proration of workdays.

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

A U.S. person must file FinCEN 114 (FBAR) if the aggregate value of all foreign financial accounts exceeds $10,000 at any point during the calendar 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

U.S.-source NQSO income paid to a nonresident alien is subject to 30% NRA withholding (or lower treaty rate) on the U.S.-sourced portion under IRC Section 1441.

(CEP) Certified Equity Professional Practice Test

(CEP) Certified Equity Professional Practice Test

CEP Tax Planning & Compliance 5