Exam 19: Deferred Compensation

Under what circumstances is it advantageous for an employee to elect to be taxed immediately as ordinary income on the FMV in excess of the amount paid for restricted property?

In a direct transfer from one qualified retirement plan to another qualified retirement plan, the employer does not have to withhold 20% of the amount of the direct transfer.

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.It is trading at $10 per share when Sam is issued 1,000 shares, and he does not make a § 83(b) election.At the end of 2019, the stock is selling for $13 per share.Sam remains a full-time employee of Pony for the required two-year vesting period, at which time the stock is worth $30 per share (in 2021).Sam sells his 1,000 shares in 2023 at $36 per share.What amount and type of income will Sam recognize in 2023?

A restricted property plan is considered a deferred compensation plan.

If an individual is ineligible to make a deductible contribution to a traditional IRA, nondeductible contributions of any amount can be made to a traditional IRA.

The compensation paid by Purple Corporation to the participants of a profit sharing plan in 2019 was $38,300.During 2019, Purple contributed $10,000 to the plan.Purple's deductible amount for 2019 is what amount, if any?

The minimum annual distributions must be made over the life of the participant or the life of the participant and a designated individual beneficiary.

Dana, age 31 and unmarried, is an active participant in a qualified retirement plan.Her AGI is $124,000.What amount, if any, may she contribute to a Roth IRA in 2019?

Chee is a key employee of an H.R 10 (Keogh) defined contribution plan (a profit sharing plan) created by a partnership.Answer each of the following independent questions. a.During 2019, $7,400 is contributed to the H.R.10 plan for Chee.What amount is deductible if his earned income is $45,000 (after the deduction for one-half of self employment tax)? b.In 2019, $8,020 is contributed to the H.R.10 (Keogh) plan on Chee's behalf.If his earned income is $36,000 (after the deduction for one-half of self employment tax), what deduction, if any is allowed? c.The partnership had a bad year in 2019, and only $820 was contributed to the H.R.10 plan on Chee's behalf.He earned only $700 during 2019.Calculate Chee's allowable deduction.

Any pretax amount elected by an employee as a plan contribution to a § 401(k) plan that does not exceed the statutory limit is not includible in gross income in the year of deferral and is 100% vested.

Heather, age 48, is the sole remaining participant of a money purchase pension plan.The plan is terminated and a $240,000 taxable distribution is made to Heather.The early distribution penalty tax, if any, for 2019 is:

Deidre has five years of service completed as of February 5, 2019, her employment anniversary date.If the defined benefit plan [not a § 401(m) arrangement] uses the cliff vesting schedule, determine Deidre's nonforfeitable percentage.

A cash balance plan is a hybrid form of pension plan that is similar in many aspects to a defined contribution plan.

A taxpayer who receives a distribution can avoid current taxation by rolling the distribution into another qualified employer retirement plan or into an IRA.

Joey has been an active participant in a defined benefit plan for 21 years.During his last 5 years of employment, Joey earned $32,000, $48,000, $55,000, $95,000, and $105,000, respectively (representing his highest-income years). a.Calculate Joey's maximum allowable benefits from this qualified plan in 2019 (assume there are fewer than 100 participants). b.Assume that Joey's average compensation for his three high years is $203,000.Calculate his maximum allowable benefits.

To postpone income tax obligations as long as possible, retirement assets should be taken from which assets (or accounts) first?