Exam 15: Choice of Business Entity - Other Considerations

On September 15,2013,Spiral Corporation grants Jay an option to acquire 250 shares of the company's stock for $10 per share.The fair market price of the stock on the date of grant is $14.The option does not have a readily ascertainable fair market value.How much must Jay report as income at the date of grant?

Sonya is an employee of Gardner Technology and will retire at the end of the current year after 8 years of service.Under Gardner's pension plan she can retire at 60% of the average of her three highest consecutive years' salary.Her average for the highest consecutive years' salary was $30,000.What is the maximum amount Sonya can receive from Gardner's pension plan?

On October 23,2013,McIntyre sells 700 shares of stock at $26 per share.McIntyre acquired the stock on June 1,2012,when he exercised his option to purchase the shares through his company's incentive stock option plan.The exercise price was $12 per share and the fair market value of the stock at the date of exercise was $16 per share.For 2013,McIntyre must report Ordinary Capital Income Gain a. \- 0- \7 ,000 b. \ -0- \ 9,800 c. \ 9,8900 \- 0- d. \2 ,800 \ 7,000

The Data Company employs John and Jesse.John has worked for Data for 4 years,whereas Jesse has worked for the company for only 18 months.Both are 27 years old. I.John is eligible to participate in Data's qualified pension plan. II.Jesse is eligible to participate in Data's qualified pension plan.

Under a nonqualified pension plan I.The yearly earnings on the pension plan assets are taxable income to the employee. II.An employer's contribution is taxable income to the employee at the time of the contribution.

Kathy and Patrick are married with salaries of $28,000 and $21,000,respectively.Adjusted gross income on their jointly filed tax return is $54,000.Both individuals are active participants in employer provided qualified pension plans.What are Kathy and Patrick's maximum combined IRA contribution and deduction amounts? $Contribution\quad Deduction$ a. $\$-0- \quad\$ - 0 -$ b. $\$ 11,000 \quad \$ - 0 -$ c. $\$ 5,500 \quad \$ 5,500$ d. $\$ 11,000 \quad \$ 8,000$ e. $\$ 11,000 \quad \$ 11,000$

Jim,age 71,is a single taxpayer who retired from his job at the Lansing Corporation in 2012.On January 1,2013,when he begins to receive his annuity distribution,the value of his pension plan assets is $200,000 and his basis is zero.What amount must Jim receive in 2013 and how much of the amount he receives is taxable? Required Amount Distribution Taxable a. \ 7,299 \ 7,299 b. \ 7,547 \- 0- c. \ 7,547 \ 7,547 d. \ 12,000 \ 10,000

Match each statement with the correct term below. -Defined benefit plan

Tim has a 25% interest in Hill and Associates,a partnership.Tim is eligible for coverage as an employee under the firm's qualified pension plan.

Harriet is an employee of Castiron Inc.and earns $200,000 in 2012.The maximum amount Castiron can contribute to a money purchase plan on behalf of Harriet is

The Holden Corporation maintains a SIMPLE-IRA retirement plan for its employees.The company has notified its employees that for 2013 it will fund the SIMPLE-IRA by matching an employee's contribution up to a maximum of 3% of the employee's salary.Harrison's salary in 2013 is $50,000 and he contributed $2,000 to the plan.What amount must Holden contribute on Harrison's behalf?

Under a Roth IRA I.Any taxpayer may contribute and deduct up to $5,500 deductible contributions per year. II.The maximum contribution is phased-out for unmarried taxpayers with adjusted gross income between $112,000 and $127,000.

A Keogh plan is a type of qualified pension for self-employed individuals.An individual or entity that establishes a Keogh plan can I.Only establish a defined contribution profit sharing pension plan. II.Have both employees and self-employed individuals as participants.

Grand Corporation has $100,000 of U.S.source taxable income and $200,000 of foreign source taxable income from operations in Poland.Poland levied $80,000 in taxes on the foreign source income.U.S.taxes before credits are $105,000.The overall foreign tax credit limitation is

The Rector Corporation maintains a SIMPLE-IRA retirement plan for its employees.The company has notified its employees that in 2013 it will fund the SIMPLE-IRA by matching an employee's contribution up to a maximum of 2% of the employee's salary.Avis' salary in 2013 is $240,000 and she contributes $2,800 to the plan.What amount must Avis contribute on Andorra's behalf?

An exemption amount is allowed for the AMT calculation I.as a deduction from tentative AMTI. II.to provide the average individual taxpayer with the opportunity to not be effected by the AMT provisions. III.through legislative grace for taxpayers with moderate amounts of taxable income and without significant preferences and/or adjustments. IV.In the amount of $51,900 for married taxpayers filing jointly.

Contributions to a Roth IRA: I.May be rolled-over from a regular IRA in a nontaxable transaction. II.May be tax deductible. III.Are not taxed when withdrawn if they have been in an established account for at least five years and the taxpayer is at least 59¹/₂ before withdrawals are made.

One of the benefits of an incentive stock option is that the employee can sell the option at any time.

On May 10,2011,Rafter Corporation granted Peter an option to acquire 500 shares of the company's stock for $10 per share.The fair market price of the stock on the date of grant was $12.The fair market value of the option at the date of grant was $3.Peter exercises the option on July 1,2013,when the fair market value of the stock is $20.How much income must Peter report at the date of exercise?

To obtain the rehabilitation expenditures tax credit certain criteria must be satisfied.Which of the following are correct statements about the credit? I.If the rehabilitated structure is sold before the end of the ten-year period following the year of the tax credit,recapture occurs. II.The amount of the credit can be either 10% or 20% of qualified expenditures,depending on the classification of the building.