Exam 19: Deferred Compensation

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 Sam is issued 1,000 shares,and he does not make a § 83(b)election.At the end of 2016,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 2018).Sam sells his 1,000 shares in 2020 at $36 per share.What amount and type of income will Sam recognize in 2020?

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

A failure to make a minimum required distribution to a participant in any taxable year results in a 50% nondeductible excise tax on any excess of the amount that should have been distributed over the amount that actually was distributed.

Qualified plans have higher startup and administrative costs than nonqualified plans.

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

In a stock bonus plan,contributions are dependent on the employer's profits.

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 2016 is:

Merrill is a participant in a SIMPLE § 401(k)plan,and he elects to contribute 4% of his $40,000 compensation to the account,while his employer contributes 3%.What amount will vest immediately,if any?

A defined benefit plan must reduce the $210,000 (in 2016)maximum benefits payable by one-tenth for each year of participation under 10 years that an employee has performed.

What is a profit sharing plan?

Emmanuel,an executive,receives a $600,000 payment under a golden parachute agreement.Emmanuel's base amount from Blue Corporation is $140,000.What amount,if any,is deductible by the corporation?

The maximum annual contribution to a Roth IRA for an unmarried taxpayer who is age 35 is the smaller of $5,500 or the individual's compensation for the year.

What is a highly compensated employee?

Susan is a self-employed accountant with a qualified defined contribution plan (a Keogh plan).She has the following income items for the year: Earned income from self-employment $50,000 Dividend income 8,000 Interest income 2,000 Net short-term capital gain 12,000 Adjusted gross income $72,000 ​ What is the maximum amount Susan can deduct as a contribution to her retirement plan in 2016,assuming the self-employment tax rate is 15.3%?

Dana contributes $2,000 too much to a § 401(k)plan which 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.

In 2016,Jindal Corporation paid compensation of $42,300 to the participants in a profit sharing plan and then contributed $12,800 to the plan.Jindal's deductible amount and any contribution carryover are as follows:

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

If the special election under § 83(b)is made as a result of a restricted property transaction,which statement is false?

The compensation paid by Purple Corporation to the plan participants of a profit sharing plan in 2016 was $38,300.During 2016,Purple Corporation contributed $10,000 to the plan.Purple's deductible amount for 2016 is what amount,if any?

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.