Exam 15: Choice of Business Entity -- Other Considerations

Wan-Ying,age 64,retired from the Meadowbrook Corporation during the current year.Wan-Ying's defined contribution profit sharing plan is valued at $300,000 at her retirement date.Which of the following are correct statements? I.Beginning on April 1 of the following tax year,Wan-Ying must receive either a lump sum distribution from her pension plan or begin to receive an annuity distribution. II.By electing to receive a lump-sum distribution at the date of her retirement,Wan-Ying can wait 5 years before receiving the lump sum distribution. ​

The tax advantage of a Roth IRA is that although the contributions are not deductible,the distributions of contribution and income are tax-free.

Sonya is an employee of Gardner Technology and will retire at the end of the current year after 8 years of service.Under Gardner's pension plan she can retire at 60% of the average of her three highest consecutive years' salary.Her average for the highest consecutive years' salary was $30,000.What is the maximum amount Sonya can receive from Gardner's pension plan?

Amanda is an employee of the Kiwi Corporation with a yearly salary of $80,000.The company maintains a noncontributory profit-sharing plan.During the year the company contributes $24,000 to the plan on her behalf in recognition of her outstanding work.The Kiwi Corporation is subject to an excess contribution penalty of

A Keogh plan is a type of qualified pension for self-employed individuals.An individual or entity that establishes a Keogh plan can I.Only establish a defined contribution profit sharing pension plan. II.Have both employees and self-employed individuals as participants. ​

Ortiz Corporation determined its AMTI to be $120,000 for 2017.If the regular income tax liability is $15,000,what is the amount of the alternative minimum tax for 2017?

Abraham establishes a Roth IRA at age 45 and contributes $5,500 per year for the next 25 years.Assume he meets the income limits during this period.The account balance is now $364,500 ($137,500 contributions,$227,000 earnings).Abraham would like to draw out the entire amount this year.How much tax would Abraham have to pay as a result of this decision?

Match each statement with the correct term below. -Defined benefit plan

Nestor receives the right to acquire 1,000 shares of Knolls Corporation stock through the company's incentive stock option plan.The fair market value of the stock at the date of the grant is $20 and the exercise price of the option is $24 per share.For the option to qualify as an incentive stock option I.Nestor must exercise the option within 10 years of the date of grant. II.Nestor must hold the stock for at least 2 years after the date of exercise before selling it. ​

Carmelo,an employee of the Rondo Corporation,is granted an option to acquire 400 shares of the company's stock under its nonqualified stock option plan.Which of the following are correct statements? I.If the option has a readily ascertainable fair market value,Carmelo must report income equal to the fair market value of the option times the number of shares granted (i.e. ,400 shares). II.If the option does not have a readily ascertainable fair market value Carmelo will not report any income at the date of grant. ​

Ester is employed by Montgomery Enterprises and will retire at the end of the current year after 22 years of service.Under the company's defined benefit plan,she can retire at 80% of the average of her three highest consecutive years' salary.Her average salary over these three years is $80,000.What is the maximum amount Ester can receive from Montgomery's pension plan?

Jane is a partner with Smithstone LLP.Smithstone maintains a profit-sharing Keogh plan for its partners and employees.Determine the maximum deductible contribution Jane can make to the plan in each of the following situations: a.Jane's net self-employment income is $80,000. b.Jane's net self-employment income is $280,000.

Helen receives the right to acquire 700 shares of Smith Corporation stock through the company's incentive stock option plan.The fair market value of the stock at the date of the grant is $8 and the exercise price of the option is $15 per share.The fair market value of the stock at the date of exercise is $19.Helen will recognize income at the date of grant and the exercise date of ​ Date of grant Exercise date

Karen receives the right to acquire 400 shares of Fremont Corporation stock through the company's incentive stock option plan.The fair market value of the stock at the date of the grant is $15 and the exercise price of the option is $19 per share.The fair market value of the stock at the date of exercise is $22.At the date of exercise,the tax consequences to Karen and the Fremont Corporation are ​ Karen Fremont

Contributions to a Roth IRA: I.May be rolled-over from a regular IRA in a nontaxable transaction. II.May be tax deductible. III.Are not taxed when withdrawn if they have been in an established account for at least five years and the taxpayer is at least 59¹/₂ before withdrawals are made. ​

Pension plans are subject to excess contribution penalties.Which of the following are correct: I.There is an excess contribution penalty for IRAs or Roth IRAs that equal 6% of the amount in excess of $5,500 or the value of the individual's IRA whichever is less. II.A 10% excess contribution penalty applies to IRAs and Roth IRAs. ​

Isabelle and Marshall are married with salaries of $50,000 and $45,000,respectively.Adjusted gross income on their jointly filed tax return is $103,000.Both individuals are active participants in employer provided qualified pension plans.What are Isabelle and Marshall's maximum combined IRA contribution and deduction amounts? ​ Contribution Deduction

Arturo is a 15% partner in the Franklin Group and has net self-employment income of $250,000 in 2017.The maximum amount that Arturo can contribute to a Keogh money purchase plan is

Lynne is a 15% partner with Webb Brothers and has net self-employment income of $100,000 in 2017.The maximum amount that Lynne can contribute to a Keogh profit sharing plan is

Match each statement with the correct term below. -IRA