Exam 19: Deferred Compensation

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?

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?

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

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.

Under a nonqualified stock option (NQSO) plan which is granted to Damon on March 15, 2015, he may purchase 200 shares of stock from his employer at $15 per share. At that date, the option does not have a readily ascertainable fair market value. Eight months later on the date of exercise the fair market value of the stock is $20. On December 1, 2017, Damon sells 100 shares for $24 each. Which of the following would be the result of these transactions on the date of exercise and the date of sale?

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?

Dana, age 31 and unmarried, is an active participant in a qualified retirement plan. Her AGI is $122,000. What amount, if any, may Dana contribute to a Roth IRA in 2017?

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.

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.

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 trading at $13 per share. How much income, if any, must Sam recognize in 2017?

Traditional IRA contributions made after an individual reaches the age of 65 are treated as excess contributions and are subject to a nondeductible 6% excise penalty tax.

A restricted property plan is considered a deferred compensation plan.

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?

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

An individual, age 40, who is not subject to the phase-out provision may contribute a nondeductible amount to a Roth IRA up to $5,500 per year in 2017.

Under a defined benefit plan, the annual benefit payable to an employee is limited to the smaller of $215,000 (in 2017) or 100% of the employee's average compensation for the highest 3 years of employment.

A participant has an adjusted basis of $0 in any nondeductible contributions to a traditional IRA.

Any pre-tax amount elected by an employee as a plan contribution to a § 401(k) plan that does not exceed the statutory limit is not includible in gross income in the year of deferral and is 100% vested.

Which of the following characteristics describes a defined benefit plan?

An individual is considered an active participant in an employer-sponsored retirement plan merely because an individual's spouse is an active participant for any part of a plan year in applying the IRA phase-out provision.