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1. Bill's employer offers $200,000 of group-term life insurance to her. Because group-term life insurance is a tax-free fringe benefit, Bill will not have to include any of the benefit he receives in his gross income.

True

False

2. Which type of IRS examination is generally used for taxpayers with complex business transactions?

Correspondence

DIF

Office

Field

3. Which one of the following individuals must include in gross income all or a portion of the value of the employee fringe benefit received?

All of these taxpayers must recognize some gross income.

Madi, a hotel employee who is allowed to stay at any of the company's hotels for free.

Bo, an oil company executive who is provided with free online subscriptions to The Wall Street Journal and other business periodicals.

Jill, a legal secretary who is provided with a discount of 50 percent on legal services purchased from her employer.

Phil, a department store employee who is allowed to purchase merchandise at a discount of 10 percent off the retail price (the store's profit margin is 30 percent).

4. Employers often withhold federal income taxes directly from employees' paychecks. What tax policy goal is achieved by this practice?

Certainty

Convenience

Equity

Economy

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