Exam 19: Deferred Compensation

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.

James,an executive,receives a $600,000 payment under a golden parachute agreement.James's base amount from Silver,Inc. ,is $140,000.What is the total tax James must pay,assuming a 39.6% individual tax rate?

The special § 83(b)election (i.e. ,where income is taxed in the year of the grant)with respect to a restricted stock plan may be advantageous in which of the following situations in 2016?

Group life insurance is considered a deferred compensation plan.

Nick negotiates a $4.5 million contract per year with a major college football program to become its head coach.What amount is deductible by the program in 2016 his first full year of employment.

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.

Which statement is true with respect to golden parachute payments?

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?

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.

What is a defined contribution plan?

Joyce,age 40,and Sam,age 42,who have been married for seven years,are both active participants in qualified retirement plans.Their total AGI for 2016 is $120,000.Each is employed and earns a salary of $65,000.What are their combined deductible contributions to traditional IRAs?

If a NQSO has a readily ascertainable value,an employee recognizes income on the grant date.

The $1 million deduction limitation on executive compensation is decreased by any nondeductible golden parachute payments made to an employee.

Yvonne exercises incentive stock options (ISOs)for 100 shares of Apple Corporation stock at the option price of $100 per share on May 21,2016,when the fair market value is $120 per share.She sells the 100 shares of stock 3 1/2 years later for $140.Determine the recognized gain on the sale and classify it as capital or ordinary.

Compare a § 401(k)plan with an IRA.

A direct transfer of funds from a qualified retirement plan to an IRA is subject to the withholding rules.

A participant,who is age 38,in a cash or deferred arrangement plan [§ 401(k)] may contribute up to what amount in 2016?

Determine the nonforfeiture percentage under these independent situations for a defined benefit plan using the graded vesting rule. a.Mari has five years of service completed as of February 5,2016 (which is her employment anniversary date). b.Jake,age 41,has six years of service completed as of March 2,2016 (which is his employment anniversary date). c.Sammie,age 26,has four years of service completed as of July 21,2016 (which is his employment anniversary date).

A defined benefit retirement plan covers 72% of the non-highly compensated individuals.The plan benefits 48 of the 131 employees.Which is true?

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 2016,his early distribution penalty is: