Question 1

An employer obtains a tax deduction at the same time and to the extent that ordinary income is recognized by the employee who receives nonqualified stock options.

Accepted Answer

A) True 
 B)False

Question 2

Forfeitures may be allocated to the accounts of the remaining participants in defined contribution plans.

Accepted Answer

A) True 
 B)False

Question 3

Explain to a small business owner some advantages and disadvantages of a simplified employee pension plan (SEP).

Accepted Answer

Defined benefit and defined contribution

Question 4

A participant who is at least age 59 1/2 can make a tax-free qualified withdrawal from a Roth IRA after a five-year holding period.

Accepted Answer

A) True 
 B)False

Question 5

A company is denied a deduction for a golden parachute payment to an employee but not for a golden parachute payment to an independent contractor.

Accepted Answer

A) True 
 B)False

Question 6

Sammy, age 31, is unmarried and is not an active participant in a qualified retirement plan.His modified AGI is $55,000 in 2019.The maximum amount that Sammy can deduct for a contribution to a traditional IRA is:

Accepted Answer

A) $2,800. 
B) $3,500. 
C) $5,000. 
D) $6,000. 
E) None of these. 
A) $2,800. 
B) $3,500. 
C) $5,000. 
D) $6,000. 
E) None of these.

Question 7

Which would not be considered an advantage of a nonqualified stock option plan over an incentive stock option (ISO) plan?

Accepted Answer

A) Granted at any price. 
B) May have any duration. 
C) Spread subject to alternative minimum tax. 
D) Governed by § 83. 
E) All of these. 
A) Granted at any price. 
B) May have any duration. 
C) Spread subject to alternative minimum tax. 
D) Governed by § 83. 
E) All of these.

Question 8

What is a defined contribution plan?

Accepted Answer

A defined contribution pension plan (or

Question 9

The payout to an employee in a cash balance plan is based on a formula based on years of service.

Accepted Answer

A) True 
 B)False

Question 10

Dana contributes $2,000 too much to a § 401(k) plan but it is not returned within 2 1/2 months after the close of the tax year.The employer will have to pay a tax of $200.

Accepted Answer

A) True 
 B)False

Question 11

On February 1, 2019, Tuan withdrew $15,000 from his IRA #1.He deposited the funds back into IRA #1 within 60 days (a "rollover").Tuan may do one more nontaxable rollover distribution from either IRA #1 or IRA #2 in April
2019.

Accepted Answer

A) True 
 B)False

Question 12

Determine the maximum annual benefits payable in 2019 to a participant from a defined benefit plan in the following independent situations:
a.Jacob, age 67, has been a participant for 14 years, and his highest average compensation for
3 years is $92,000.
b.Sloane, age 66, has been a participant for 8 years (12 years of service), and her highest average compensation for 3 years is $119,000.

Accepted Answer

a.$92,000 in 2019.The maximum allowable

Question 13

Pony, Inc., issues restricted stock to employees in July 2019, with a two-year vesting period and an SRF.An employee must remain a full-time employee of Pony for two years after the restricted stock is issued.The stock is trading at $10 per share when it is issued.An employee, Sam, decides to make the § 83(b) election with his 1,000 shares.At the end of 2019, the stock is trading at $13 per share.How much income, if any, must Sam recognize in 2019?

Accepted Answer

A) $-0-. 
B) $10,000 capital gain. 
C) $10,000 ordinary income. 
D) $13,000 capital gain. 
E) $13,000 ordinary income. 
A) $-0-. 
B) $10,000 capital gain. 
C) $10,000 ordinary income. 
D) $13,000 capital gain. 
E) $13,000 ordinary income.

Question 14

What statement is false with respect to an incentive stock option (ISO)?

Accepted Answer

A) To qualify as an ISO, the option price must equal or exceed the fair market value of the stock at the time the option is granted. 
B) The spread is not subject to the alternative minimum tax. 
C) If the employee meets the holding period requirement, the employer does not obtain a business deduction. 
D) The spread is the excess of the FMV of the share at the date of exercise over the option price. 
E) None of these are false. 
A) To qualify as an ISO, the option price must equal or exceed the fair market value of the stock at the time the option is granted. 
B) The spread is not subject to the alternative minimum tax. 
C) If the employee meets the holding period requirement, the employer does not obtain a business deduction. 
D) The spread is the excess of the FMV of the share at the date of exercise over the option price. 
E) None of these are false.

Question 15

Compare a § 401(k) plan with an IRA.

Accepted Answer

An instructor can use Concept Summary 19

Question 16

Scott, age 68, has accumulated $850,000 in a defined contribution plan, $100,000 of which represents his own after- tax contributions.If the full amount is distributed in 2019, his early distribution penalty is:

Accepted Answer

A) $0. 
B) $75,000. 
C) $85,000. 
D) $127,500. 
E) None of these. 
A) $0. 
B) $75,000. 
C) $85,000. 
D) $127,500. 
E) None of these.

Question 17

If a taxpayer receives an early distribution from a qualified retirement plan, a 10% additional tax is levied on the full amount of any distribution includible in gross income.

Accepted Answer

A) True 
 B)False

Question 18

From an employee's point of view, discuss the difference between the tax treatment accorded to a nonqualified stock option (NQSO) that has an ascertainable fair market value and one that does not.

Accepted Answer

If a nonqualified stock option (NQSO) ha

Question 19

Which of the followings is not a characteristic of a Keogh plan?

Accepted Answer

A) It establishes a trust. 
B) It is considered to be a qualified plan. 
C) Contribution to plan by extension due date. 
D) Favorable 10-year forward averaging is not available. 
E) All of these are characteristics. 
A) It establishes a trust. 
B) It is considered to be a qualified plan. 
C) Contribution to plan by extension due date. 
D) Favorable 10-year forward averaging is not available. 
E) All of these are characteristics.

Question 20

A defined benefit plan must reduce the $225,000 (in 2019) maximum benefits payable by one-tenth for each year of participation under 10 years that an employee has performed.

Accepted Answer

A) True 
 B)False

An employer obtains a tax deduction at the same time and to the extent that ordinary income is recognized by the employee who receives nonqualified stock options.

Forfeitures may be allocated to the accounts of the remaining participants in defined contribution plans.

Explain to a small business owner some advantages and disadvantages of a simplified employee pension plan (SEP).

A participant who is at least age 59 1/2 can make a tax-free qualified withdrawal from a Roth IRA after a five-year holding period.

A company is denied a deduction for a golden parachute payment to an employee but not for a golden parachute payment to an independent contractor.

Sammy, age 31, is unmarried and is not an active participant in a qualified retirement plan.His modified AGI is $55,000 in 2019.The maximum amount that Sammy can deduct for a contribution to a traditional IRA is:

Which would not be considered an advantage of a nonqualified stock option plan over an incentive stock option (ISO) plan?

What is a defined contribution plan?

The payout to an employee in a cash balance plan is based on a formula based on years of service.

Dana contributes $2,000 too much to a § 401(k) plan but it is not returned within 2 1/2 months after the close of the tax year.The employer will have to pay a tax of $200.

On February 1, 2019, Tuan withdrew $15,000 from his IRA #1.He deposited the funds back into IRA #1 within 60 days (a "rollover").Tuan may do one more nontaxable rollover distribution from either IRA #1 or IRA #2 in April 2019.

What statement is false with respect to an incentive stock option (ISO)?

Compare a § 401(k) plan with an IRA.

Scott, age 68, has accumulated $850,000 in a defined contribution plan, $100,000 of which represents his own after- tax contributions.If the full amount is distributed in 2019, his early distribution penalty is:

If a taxpayer receives an early distribution from a qualified retirement plan, a 10% additional tax is levied on the full amount of any distribution includible in gross income.

From an employee's point of view, discuss the difference between the tax treatment accorded to a nonqualified stock option (NQSO) that has an ascertainable fair market value and one that does not.

Which of the followings is not a characteristic of a Keogh plan?

A defined benefit plan must reduce the $225,000 (in 2019) maximum benefits payable by one-tenth for each year of participation under 10 years that an employee has performed.

An Introduction to Taxation and Understanding the Federal Tax Law

Working With the Tax Law

Tax Formula and Tax Determination an Overview of Property Transactions

Gross Income: Concepts and Inclusions

Gross Income: Exclusions

Deductions and Losses: in General

Deductions and Losses: Certain Business Expenses and Losses

Depreciation, Cost Recovery, Amortization, and Depletion

Deductions: Employee and Self-Employed-Related Expenses

Deductions and Losses: Certain Itemized Deductions

Investor Losses

Alternative Minimum Tax

Tax Credits and Payment Procedures

Property Transactions: Determination of Gain or Loss and Basic Considerations

Property Transactions: Nontaxable Exchanges

Property Transactions: Capital Gains and Losses

Property Transactions: Section 1231 and Recapture Provisions

Accounting Periods and Methods

Corporations and Partnerships

Filters

Exam 19: Deferred Compensation

An employer obtains a tax deduction at the same time and to the extent that ordinary income is recognized by the employee who receives nonqualified stock options.

Forfeitures may be allocated to the accounts of the remaining participants in defined contribution plans.

Explain to a small business owner some advantages and disadvantages of a simplified employee pension plan (SEP).

A participant who is at least age 59 1/2 can make a tax-free qualified withdrawal from a Roth IRA after a five-year holding period.

A company is denied a deduction for a golden parachute payment to an employee but not for a golden parachute payment to an independent contractor.

Sammy, age 31, is unmarried and is not an active participant in a qualified retirement plan.His modified AGI is $55,000 in 2019.The maximum amount that Sammy can deduct for a contribution to a traditional IRA is:

Which would not be considered an advantage of a nonqualified stock option plan over an incentive stock option (ISO) plan?

What is a defined contribution plan?

The payout to an employee in a cash balance plan is based on a formula based on years of service.

Dana contributes $2,000 too much to a § 401(k) plan but it is not returned within 2 1/2 months after the close of the tax year.The employer will have to pay a tax of $200.

On February 1, 2019, Tuan withdrew $15,000 from his IRA #1.He deposited the funds back into IRA #1 within 60 days (a "rollover").Tuan may do one more nontaxable rollover distribution from either IRA #1 or IRA #2 in April 2019.

What statement is false with respect to an incentive stock option (ISO)?

Compare a § 401(k) plan with an IRA.

Scott, age 68, has accumulated $850,000 in a defined contribution plan, $100,000 of which represents his own after- tax contributions.If the full amount is distributed in 2019, his early distribution penalty is:

If a taxpayer receives an early distribution from a qualified retirement plan, a 10% additional tax is levied on the full amount of any distribution includible in gross income.

From an employee's point of view, discuss the difference between the tax treatment accorded to a nonqualified stock option (NQSO) that has an ascertainable fair market value and one that does not.

Which of the followings is not a characteristic of a Keogh plan?

A defined benefit plan must reduce the $225,000 (in 2019) maximum benefits payable by one-tenth for each year of participation under 10 years that an employee has performed.

An Introduction to Taxation and Understanding the Federal Tax Law

Working With the Tax Law

Tax Formula and Tax Determination an Overview of Property Transactions

Gross Income: Concepts and Inclusions

Gross Income: Exclusions

Deductions and Losses: in General

Deductions and Losses: Certain Business Expenses and Losses

Depreciation, Cost Recovery, Amortization, and Depletion

Deductions: Employee and Self-Employed-Related Expenses

Deductions and Losses: Certain Itemized Deductions

Investor Losses

Alternative Minimum Tax

Tax Credits and Payment Procedures

Property Transactions: Determination of Gain or Loss and Basic Considerations

Property Transactions: Nontaxable Exchanges

Property Transactions: Capital Gains and Losses

Property Transactions: Section 1231 and Recapture Provisions

Accounting Periods and Methods

Corporations and Partnerships

Filters