Exam 15: Choice of Business Entity - Other Considerations

Alex is 37 years old,single and employee of Ellis Company. I.If Alex is an active participant in the company's pension plan,he is allowed to make a contribution to his IRA account only if his adjusted gross income is less than $59,000. II.If Alex is an active participant in the company's pension plan,and has adjusted gross income of $64,000,he is allowed to contribute $5,500 to his IRA account,but he is only allowed a deduction of $2,750 for the contribution because his adjusted gross income is between $59,000 - $69,000.

On May 5,2011,Elton Corporation granted Germaine an option to acquire 100 shares of the company's stock for $ 8 per share.The fair market price of the stock on the date of grant was $14.The stock requires that Germaine remain with the company for one year after the date of exercise.The option did not have a readily ascertainable fair market value.Germaine exercises the option on June 12,2012,when the fair market value of the stock is $18.On June 12,2013,the fair market value of the stock is $21 per share.How much must he report as income in 2012 and 2013? 2012 2013 a. \1 ,000 \3 00 b. \1 ,000 \- 0- c. \4 00 \- 0- d. \- 0- \1 ,300

Match each statement with the correct term below. -Money purchase plan

The adjustment for three-fourths of the excess adjusted current earnings (ACE)over AMTI before the ACE adjustment applies only to corporations.

When calculating AMTI,individual taxpayers must add back the following: I.Charitable contributions. II.Qualified home mortgage interest.

The tax advantage of a Roth IRA is that although the contributions are not deductible,the distributions of contribution and income are tax-free.