Question 1

The "spread" on an incentive stock option is subject to the alternative minimum tax.

Accepted Answer

A) True 
 B)False  True

Question 2

Distributions from a Roth IRA that are subject to taxation are treated first as from earnings and last as from contributions.

Accepted Answer

A) True 
 B)False  False

Question 3

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 2016,$7,400 is contributed to the H.R.10 plan for Chee.What amount is deductible if Chee's earned income is $45,000 (after the deduction for one-half of self employment tax)?
b.In 2016,$8,020 is contributed to the H.R.10 (Keogh)plan on Chee's behalf.If Chee's 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 2016,and only $820 was contributed to the H.R.10 plan on Chee's behalf.Chee earned only $700 during 2015.Calculate Chee's allowable deduction.

Accepted Answer

​
a.Lesser of $53,000 or 20% × $45,000,so a $9,000 ceiling applies.However,because only $7,400 was contributed,only $7,400 can be deductible. b.Lesser of $53,000 or 20% × $36,000.Therefore,$7,200 can be taken as a deduction for AGI. c.Lesser of $53,000 or 20% × $700.Therefore,$140 can be deductible.​

Question 4

For the spousal IRA provision to apply,a joint return must be filed.

Accepted Answer

A) True 
 B)False

Question 5

A NQDC plan cannot discriminate in favor of officers or other highly compensated employees.

Accepted Answer

A) True 
 B)False

Question 6

If a person has funds from sources other than retirement assets when he or she retires,which retirement asset should be spent first?

Accepted Answer

The most tax-efficient result is to post

Question 7

Pony,Inc. ,issues restricted stock to employees in July 2016,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 the stock is issued.An employee,Sam,decides to make the § 83(b)election with his 1,000 shares.At the end of 2016,the stock is selling for $13 per share.What amount,if any,can Pony take as a compensation deduction?

Accepted Answer

A) $0. 
B) $10,000 in 2016. 
C) $13,000 in 2016. 
D) $10,000 when stock is sold. 
E) $13,000 when stock is sold. 
A) $0. 
B) $10,000 in 2016. 
C) $13,000 in 2016. 
D) $10,000 when stock is sold. 
E) $13,000 when stock is sold.

Question 8

Danielle,who is retired,reaches age 70 1/2 in 2015,and she will also be age 71 in 2015.She has a $150,000 balance in her traditional IRA.If her life expectancy is 15.3 years,what distribution,if any,must be made by April 1,2016?

Accepted Answer

A) $0 
B) $9,804 
C) $19,608 
D) $150,000 
E) None of the above 
A) $0 
B) $9,804 
C) $19,608 
D) $150,000 
E) None of the above

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

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 11

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

Accepted Answer

A) True 
 B)False

Question 12

Mary establishes a Roth IRA at age 50 and contributes the maximum amount per year to the Roth IRA for 15 years.The account is now worth $199,000,consisting of $75,000 in contributions plus $124,000 in accumulated earnings.How much can Mary withdraw tax-free?

Accepted Answer

A) $0 
B) $75,000 
C) $124,000 
D) $199,000 
E) None of the above 
A) $0 
B) $75,000 
C) $124,000 
D) $199,000 
E) None of the above

Question 13

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

Question 14

A defined contribution plan is exempt from funding requirements.

Accepted Answer

A) True 
 B)False

Question 15

After 2011,income averaging is allowed for Federal income tax purposes.

Accepted Answer

A) True 
 B)False

Question 16

A restricted property plan is considered a deferred compensation plan.

Accepted Answer

A) True 
 B)False

Question 17

On November 19,2015,Rex is granted a nonqualified stock option to purchase 100 shares of Tan Company.On that date,the stock is selling for $8 per share,and the option price is $9 per share.Rex exercises the option on August 21,2016,when the stock is selling for $10 per share.Five months later,Rex sells the shares for $11.50 per share.
a.What amount is included in Rex's gross income in 2015?
b.What amount is included in Rex's gross income in 2016?
c.What amount and type of gain is recognized by Rex in 2017?
d.What amount,if any,is deductible by Tan Company in 2016?
e.What amount,if any,is recognized in 2016 if the stock is sold for $9.50 per share?

Accepted Answer

​
a.No gain is recognized on the grant d

Question 18

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 19

Determine the maximum annual benefits payable 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 2016.The maximum allowable

Question 20

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

Accepted Answer

A) True 
 B)False

The "spread" on an incentive stock option is subject to the alternative minimum tax.

Distributions from a Roth IRA that are subject to taxation are treated first as from earnings and last as from contributions.

For the spousal IRA provision to apply,a joint return must be filed.

A NQDC plan cannot discriminate in favor of officers or other highly compensated employees.

If a person has funds from sources other than retirement assets when he or she retires,which retirement asset should be spent first?

Danielle,who is retired,reaches age 70 1/2 in 2015,and she will also be age 71 in 2015.She has a $150,000 balance in her traditional IRA.If her life expectancy is 15.3 years,what distribution,if any,must be made by April 1,2016?

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

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.

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

Mary establishes a Roth IRA at age 50 and contributes the maximum amount per year to the Roth IRA for 15 years.The account is now worth $199,000,consisting of $75,000 in contributions plus $124,000 in accumulated earnings.How much can Mary withdraw tax-free?

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

A defined contribution plan is exempt from funding requirements.

After 2011,income averaging is allowed for Federal income tax purposes.

A restricted property plan is considered a deferred compensation plan.

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

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

An Introduction to Taxation and Understanding the Federal 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

Deduction and Losses Certain Itemized Deductions

Investor Losses

Alternative Minimum Tax

Tax Credits and Payment Procedures

Property Transactions Determination of Gain and 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

The "spread" on an incentive stock option is subject to the alternative minimum tax.

Distributions from a Roth IRA that are subject to taxation are treated first as from earnings and last as from contributions.

For the spousal IRA provision to apply,a joint return must be filed.

A NQDC plan cannot discriminate in favor of officers or other highly compensated employees.

If a person has funds from sources other than retirement assets when he or she retires,which retirement asset should be spent first?

Danielle,who is retired,reaches age 70 1/2 in 2015,and she will also be age 71 in 2015.She has a $150,000 balance in her traditional IRA.If her life expectancy is 15.3 years,what distribution,if any,must be made by April 1,2016?

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

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.

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

Mary establishes a Roth IRA at age 50 and contributes the maximum amount per year to the Roth IRA for 15 years.The account is now worth $199,000,consisting of $75,000 in contributions plus $124,000 in accumulated earnings.How much can Mary withdraw tax-free?

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

A defined contribution plan is exempt from funding requirements.

After 2011,income averaging is allowed for Federal income tax purposes.

A restricted property plan is considered a deferred compensation plan.

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

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

An Introduction to Taxation and Understanding the Federal 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

Deduction and Losses Certain Itemized Deductions

Investor Losses

Alternative Minimum Tax

Tax Credits and Payment Procedures

Property Transactions Determination of Gain and 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