Identify which of the following statements is true.
A)Fringe benefits limited by the more-than-2%-shareholder rule include stock options, group term life insurance premiums, and medical insurance premiums.
B)A shareholder owning 2% or more of an S corporation's stock, who is also an employee of the corporation, must include all statutory fringe benefits in gross income on his/her individual return.
C)Section 318 stock attribution rules are used to define 2% or more shareholders of S corporation's stock.
D)All of the above are false.

Question

Quizplus · Accepted Answer

The statement that a shareholder owning 2% or more of an S corporation's stock, who is also an employee of the corporation, must include all statutory fringe benefits in gross income on his/her individual return is true. The other statements are false. Fringe benefits limited by the more-than-2%-shareholder rule include only health and accident insurance premiums and reimbursements and contributions to HSAs or HRAs. Section 318 stock attribution rules are used to define related parties for purposes of determining the 2% shareholder threshold, but not to define the actual 2% shareholders.

Identify Which of the Following Statements Is True