Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

On January 1, 2014, Gail (an executive) receives a warrant to purchase one share of stock at $70 and on the same date the fair market value of the stock is $100. The warrant has no restrictions and has a readily ascertainable fair market value on a stock exchange of $30. She exercises the warrant on May 15, 2014, and sells the stock for $200 on December 20, 2017.
a.Calculate the amount Gail would recognize in 2014, if any.
b.Calculate the amount Gail would recognize in 2017, if any.
c.Suppose she sells the warrant in 2018 for $39. What amount would Gail recognize?

Accepted Answer

The answer of On January 1, 2014, Gail (an executive)...

Question 3

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?

Accepted Answer

A) $0 
B) $140,000 
C) $460,000 
D) $600,000 
E) None of the above 
A) $0 
B) $140,000 
C) $460,000 
D) $600,000 
E) None of the above

Question 4

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

Question 5

On November 19, 2016, 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, 2017, 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 2016?
b.What amount is included in Rex's gross income in 2017?
c.What amount and type of gain is recognized by Rex in 2018?
d.What amount, if any, is deductible by Tan Company in 2017?
e.What amount, if any, is recognized in 2017 if the stock is sold for $9.50 per share?

Accepted Answer

The answer of On November 19, 2016, Rex is granted...

Question 6

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

Accepted Answer

A) The 70% coverage requirement is not met. 
B) The plan meets the minimum participation test. 
C) The plan meets the 70% coverage requirement, but fails the minimum participation test. 
D) The plan does not meet the 70% coverage requirement, but does meet the minimum participation test. 
E) None of the above is true. 
A) The 70% coverage requirement is not met. 
B) The plan meets the minimum participation test. 
C) The plan meets the 70% coverage requirement, but fails the minimum participation test. 
D) The plan does not meet the 70% coverage requirement, but does meet the minimum participation test. 
E) None of the above is true.

Question 7

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 8

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

The answer of Determine the maximum annual benefits payable to...

Question 9

Yvonne exercises incentive stock options (ISOs) for 100 shares of Apple Corporation stock at the option price of $100 per share on May 21, 2017, when the fair market value is $120 per share. She holds the stock for only two years and sells the shares for $115 per share. Determine the recognized gain on the sale and classify it as capital or ordinary.

Accepted Answer

A) $2,000 ordinary income and $2,000 STCG. 
B) $2,000 ordinary income and $2,000 LTCG. 
C) $4,000 ordinary income. 
D) $1,500 LTCG. 
E) None of the above. 
A) $2,000 ordinary income and $2,000 STCG. 
B) $2,000 ordinary income and $2,000 LTCG. 
C) $4,000 ordinary income. 
D) $1,500 LTCG. 
E) None of the above.

Question 10

Pony, Inc., issues restricted stock to employees in July 2017, 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 2017, 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 2019). Sam sells his 1,000 shares in 2021 at $36 per share. What amount and type of income will Sam recognize in 2021?

Accepted Answer

A) $6,000 ordinary income. 
B) $6,000 capital gain. 
C) $26,000 capital gain. 
D) $6,000 capital gain; $20,000 ordinary income. 
E) $20,000 capital gain; $6,000 ordinary income. 
A) $6,000 ordinary income. 
B) $6,000 capital gain. 
C) $26,000 capital gain. 
D) $6,000 capital gain; $20,000 ordinary income. 
E) $20,000 capital gain; $6,000 ordinary income.

Question 11

Frank established a Roth IRA at age 25 and contributed a total of $131,244 to it over 38 years. The account is now worth $376,000. How much of these funds can Frank withdraw tax-free?

Accepted Answer

A) $0 
B) $131,244 
C) $244,756 
D) $376,000 
E) None of the above 
A) $0 
B) $131,244 
C) $244,756 
D) $376,000 
E) None of the above

Question 12

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.

Accepted Answer

A) True 
 B)False

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

Which of the following characteristics is not a characteristic of a stock bonus plan?

Accepted Answer

A) Can be in the form of a defined benefit plan. 
B) Contributions need not be dependent on employer's profits. 
C) Exempt from funding requirements. 
D) Not subject to plan termination insurance. 
E) None of the above. 
A) Can be in the form of a defined benefit plan. 
B) Contributions need not be dependent on employer's profits. 
C) Exempt from funding requirements. 
D) Not subject to plan termination insurance. 
E) None of the above.

Question 16

A 20% excise tax is imposed on nondeductible contributions by an employer to a qualified plan.

Accepted Answer

A) True 
 B)False

Question 17

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, 2017 (which is her employment anniversary date).
b.Jake, age 41, has six years of service completed as of March 2, 2017 (which is his employment anniversary date).
c.Sammie, age 26, has four years of service completed as of July 21, 2017 (which is his employment anniversary date).

Accepted Answer

The answer of Determine the nonforfeiture percentage under these independent...

Question 18

What is a profit sharing plan?

Accepted Answer

A profit sharing plan is a deferred comp

Question 19

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 20

Saysha is an officer of a local bank that merges with a national bank, resulting in a change of ownership. She loses her job as a result of the merger, but she receives a cash settlement of $390,000 from her employer under her golden parachute. Her average annual compensation for the past five tax years is $110,000. Calculate any nondeductible excise tax Saysha must pay, if any.

Accepted Answer

A) $0. 
B) $56,000. 
C) $110,000. 
D) $280,000. 
E) Some other amount. 
A) $0. 
B) $56,000. 
C) $110,000. 
D) $280,000. 
E) Some other amount.

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

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?

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

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

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.

Frank established a Roth IRA at age 25 and contributed a total of $131,244 to it over 38 years. The account is now worth $376,000. How much of these funds can Frank withdraw tax-free?

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

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

Which of the following characteristics is not a characteristic of a stock bonus plan?

A 20% excise tax is imposed on nondeductible contributions by an employer to a qualified plan.

What is a profit sharing plan?

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.

An Introduction to Taxation and Understanding 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 Basis Considerations

Property Transactions: Nontaxable Exchanges

Property Transactions: Capital Gains and Losses

Property Transactions: 1231 and Recapture Provisions

Accounting Periods and Methods

Corporations and Partnerships

Filters

Exam 19: Deferred Compensation

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

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?

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

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

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.

Frank established a Roth IRA at age 25 and contributed a total of $131,244 to it over 38 years. The account is now worth $376,000. How much of these funds can Frank withdraw tax-free?

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

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

Which of the following characteristics is not a characteristic of a stock bonus plan?

A 20% excise tax is imposed on nondeductible contributions by an employer to a qualified plan.

What is a profit sharing plan?

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.

An Introduction to Taxation and Understanding 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 Basis Considerations

Property Transactions: Nontaxable Exchanges

Property Transactions: Capital Gains and Losses

Property Transactions: 1231 and Recapture Provisions

Accounting Periods and Methods

Corporations and Partnerships

Filters