Exam 15: Choice of Business Entity -- Other Considerations

Under a Roth IRA I.Any taxpayer may contribute and deduct up to $5,500 deductible contributions per year. II.The maximum contribution is phased-out for unmarried taxpayers with adjusted gross income between $118,000 and $133,000. ​

The Data Company employs John and Jesse.John has worked for Data for 4 years,whereas Jesse has worked for the company for only 18 months.Both are 27 years old. I.John must be eligible to participate in Data's qualified pension plan. II.Jesse must be eligible to participate in Data's qualified pension plan. ​

Drew is a partner with Peyton LLP.Peyton maintains a money purchase Keogh plan for its partners and employees.Drew owns a 30% partnership interest in Peyton.Determine the maximum deductible contribution Drew can make to the plan in each of the following situations: a.Drew 's net self-employment income is $85,000. b.Drew's net self-employment income is $270,000.

Any structure over 100 years old is eligible for the rehabilitation tax credit.

IRS scrutiny of reasonable compensation usually deals with excess compensation paid to the shareholders of closely held corporations and unreasonably low salaries to shareholders of an S corporation.

The adjustment for three-fourths of the excess adjusted current earnings (ACE)over AMTI before the ACE adjustment applies only to corporations.

On May 10,2015,Rafter Corporation granted Peter an option to acquire 500 shares of the company's stock for $10 per share.The fair market price of the stock on the date of grant was $12.The fair market value of the option at the date of grant was $3.Peter exercises the option on July 1,2017,when the fair market value of the stock is $20.How much income must Peter report at the date of exercise?

For the current year,Steven's tentative alternative minimum tax is $24,360.His regular tax liability is $23,000.Steven has $24,000 in taxes withheld from his salary. I.Steven's alternative minimum tax is $1,360 II.Steven's tax liability is $23,000. III.Steven will have to pay an additional $360 in tax. IV.Steven's total tax liability is $24,360 ​

On February 19,2015,Woodbridge Corporation granted Harvey an option to acquire 200 shares of the company's stock for $10 per share.The fair market price of the stock on the date of grant was $16.The stock requires that Harvey remain with the company for one year after the date of exercise.The option did not have a readily ascertainable fair market value.Harvey exercises the option on September 23,2016,when the fair market value of the stock is $19.He makes a Section 83(b)election at the exercise date.On September 23,2017,the fair market value of the stock is $25 per share.How much must he report as income in 2017?

Coffin Corporation (a domestic corporation)has $200,000 of U.S.source taxable income and $600,000 of foreign source taxable income from operations in Latvia.Latvia levied $67,000 in taxes on the foreign source income.U.S.taxes before credits are $280,000.The foreign tax credit limitation is

All of the following are requirements of a qualified pension plan except:

In 2017,Billie decides to purchase a house by withdrawing $15,000 from her IRA.Billie qualifies as a first-time home- buyer.The $15,000 consists of $12,600 in nondeductible contributions and $2,400 in income earned on the plan's assets.Billie will have to pay an early withdrawal penalty of

Match each statement with the correct term below. -Money purchase plan

A Keogh plan must be established as a defined contribution plan,and the rules are similar to those of a qualified pension plan.

Ken is a 15% partner in the Robinson & Sons and has net self-employment income of $98,000,$100,000 and $102,000 in his highest three consecutive years.The maximum amount that Ken can receive under a Keogh defined benefit plan is

A Keogh plan is administratively more convenient and economical than a simplified employee pension plan (SEP).

On October 2,2017,Miriam sells 1,000 shares of stock at $20 per share.Miriam acquired the stock on November 12,2016,when she exercised her option to purchase the shares through her company's incentive stock option plan.The exercise price was $11 per share and the fair market value of the stock at the date of exercise was $14 per share.For 2017,Miriam must report ​ Ordinary Capital Income Gain

A nonqualified stock option is a right to buy a share of stock at a fixed price within a specified time period.If the employee recognizes income when the stock option is received then the employer can take a deduction of the same amount.

Thelma can get the 10% penalty on the early withdrawal from her IRA waived if the money is used to pay her son's college tuition.

Curtis is 31 years old,single,self-employed,and has no qualified pension plan.His net self-employment income is $33,000 and he contributes the maximum amount to his Keogh account during the current year.How much can Curtis deduct for AGI this year?