Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

On July 1, 2013, Red Corporation sold 100 of its common shares (worth $15 per share) to its employee Bobby for $5 per share. The sale was subject to Bobby's agreement to resell the shares to the corporation for $5 per share if his employment is terminated within the following four years. The shares were valued at $26 per share on July 1, 2017. He sold the shares for $30 per share on September 15, 2017. No special election under § 83(b) was made. Identify the correct answer.

Accepted Answer

The answer of On July 1, 2013, Red Corporation sold...

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 2017, $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 2017, $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 2017, and only $820 was contributed to the H.R. 10 plan on Chee's behalf. Chee earned only $700 during 2017. Calculate Chee's allowable deduction.

Accepted Answer

The answer of Chee is a key employee of an...

Question 4

A participant, who is age 38, in a cash or deferred arrangement plan [§ 401(k)] may contribute up to what amount in 2017?

Accepted Answer

A) $12,000 
B) $17,000 
C) $17,500 
D) $18,000 
E) None of the above 
A) $12,000 
B) $17,000 
C) $17,500 
D) $18,000 
E) None of the above

Question 5

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 2017?

Accepted Answer

A) The employer is an unstable company. 
B) The bargain element is relatively small. 
C) A minimum amount of appreciation is expected in the future. 
D) The restriction probably will not be satisfied. 
E) None of the above. 
A) The employer is an unstable company. 
B) The bargain element is relatively small. 
C) A minimum amount of appreciation is expected in the future. 
D) The restriction probably will not be satisfied. 
E) None of the above.

Question 6

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 7

If a married taxpayer is an active participant in another qualified retirement plan, the traditional IRA deduction phaseout begins at $99,000 of AGI for a joint return in 2017.

Accepted Answer

A) True 
 B)False

Question 8

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 the stock is issued. An employee, Sam, decides to make the § 83(b) election with his 1,000 shares. At the end of 2017, 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 2017. 
C) $13,000 in 2017. 
D) $10,000 when stock is sold. 
E) $13,000 when stock is sold. 
A) $0. 
B) $10,000 in 2017. 
C) $13,000 in 2017. 
D) $10,000 when stock is sold. 
E) $13,000 when stock is sold.

Question 9

A defined contribution plan is exempt from funding requirements.

Accepted Answer

A) True 
 B)False

Question 10

Zackie has five years of service completed as of February 5, 2017, which is his employment anniversary date. If his defined benefit plan [not a § 401(m) arrangement] uses the graded vesting rule, determine Zackie's nonforfeitable percentage.

Accepted Answer

A) 40% 
B) 60% 
C) 80% 
D) 100% 
E) None of the above 
A) 40% 
B) 60% 
C) 80% 
D) 100% 
E) None of the above

Question 11

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

Accepted Answer

A) True 
 B)False

Question 12

Brown, Inc., uses the three-to-seven year graded vesting approach for its defined benefit retirement plan. Peter has five years of service completed as of February 5, 2017, his employment anniversary date. Determine Peter's nonforfeitable percentage.

Accepted Answer

A) 40% 
B) 60% 
C) 80% 
D) 100% 
E) None of the above 
A) 40% 
B) 60% 
C) 80% 
D) 100% 
E) None of the above

Question 13

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 2017 is $120,000. Each is employed and earns a salary of $65,000. What are their combined deductible contributions to traditional IRAs?

Accepted Answer

A) $0 
B) $3,000 
C) $4,000 
D) $8,000 
E) None of the above 
A) $0 
B) $3,000 
C) $4,000 
D) $8,000 
E) None of the above

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

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

Accepted Answer

A) Section 457 accounts of government employees since no penalties apply once the employee is separated from employment. 
B) Section 401(k) and nonprofit § 403(b) plans because the age 55 separation rule may apply. 
C) Traditional IRAs since a taxpayer must be at least age 59 1/2 to obtain penalty-free withdrawals. 
D) Roth IRAs since no required minimum distribution rules apply. 
E) Taxable accounts. 
A) Section 457 accounts of government employees since no penalties apply once the employee is separated from employment. 
B) Section 401(k) and nonprofit § 403(b) plans because the age 55 separation rule may apply. 
C) Traditional IRAs since a taxpayer must be at least age 59 1/2 to obtain penalty-free withdrawals. 
D) Roth IRAs since no required minimum distribution rules apply. 
E) Taxable accounts.

Question 16

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 2017, his early distribution penalty is:

Accepted Answer

A) $0. 
B) $75,000. 
C) $85,000. 
D) $127,500. 
E) None of the above. 
A) $0. 
B) $75,000. 
C) $85,000. 
D) $127,500. 
E) None of the above.

Question 17

What is a highly compensated employee?

Accepted Answer

An employee is a highly compen

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

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 20

In 2017, 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:

Accepted Answer

A) $0 deductible; $12,800 carryover. 
B) $8,460 deductible; $4,340 carryover. 
C) $10,575 deductible; $2,225 carryover. 
D) $12,690 deductible; $110 carryover. 
E) None of the above. 
A) $0 deductible; $12,800 carryover. 
B) $8,460 deductible; $4,340 carryover. 
C) $10,575 deductible; $2,225 carryover. 
D) $12,690 deductible; $110 carryover. 
E) None of the above.

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

A participant, who is age 38, in a cash or deferred arrangement plan [§ 401(k)] may contribute up to what amount in 2017?

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 2017?

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

If a married taxpayer is an active participant in another qualified retirement plan, the traditional IRA deduction phaseout begins at $99,000 of AGI for a joint return in 2017.

A defined contribution plan is exempt from funding requirements.

Zackie has five years of service completed as of February 5, 2017, which is his employment anniversary date. If his defined benefit plan [not a § 401(m) arrangement] uses the graded vesting rule, determine Zackie'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.

Brown, Inc., uses the three-to-seven year graded vesting approach for its defined benefit retirement plan. Peter has five years of service completed as of February 5, 2017, his employment anniversary date. Determine Peter's nonforfeitable percentage.

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 2017 is $120,000. Each is employed and earns a salary of $65,000. What are their combined deductible contributions to traditional IRAs?

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

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

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 2017, his early distribution penalty is:

What is a highly compensated employee?

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

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

In 2017, 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:

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

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

A participant, who is age 38, in a cash or deferred arrangement plan [§ 401(k)] may contribute up to what amount in 2017?

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 2017?

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

If a married taxpayer is an active participant in another qualified retirement plan, the traditional IRA deduction phaseout begins at $99,000 of AGI for a joint return in 2017.

A defined contribution plan is exempt from funding requirements.

Zackie has five years of service completed as of February 5, 2017, which is his employment anniversary date. If his defined benefit plan [not a § 401(m) arrangement] uses the graded vesting rule, determine Zackie'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.

Brown, Inc., uses the three-to-seven year graded vesting approach for its defined benefit retirement plan. Peter has five years of service completed as of February 5, 2017, his employment anniversary date. Determine Peter's nonforfeitable percentage.

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 2017 is $120,000. Each is employed and earns a salary of $65,000. What are their combined deductible contributions to traditional IRAs?

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

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

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 2017, his early distribution penalty is:

What is a highly compensated employee?

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

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

In 2017, 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:

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