Question 1

After 2008,income averaging is allowed for Federal income tax purposes.

Accepted Answer

A) True 
 B)False

Question 2

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 3

In a stock bonus plan,contributions are dependent on the employer's profits.

Accepted Answer

A) True 
 B)False

Question 4

Dianna participates in a defined benefit plan that uses a fixed formula providing an employee with a benefit of 2% for each year of service,up to a maximum of 30 years.The total percentage accumulated before retirement is applied to the average of her three highest years of salary.Dianna works for 21 years,and the average of her three highest years of salary is $290,000.Calculate the amount of retirement benefits she will receive each year.

Accepted Answer

A) $0 
B) $102,800 
C) $110,000 
D) $250,000 
E) None of these 
A) $0 
B) $102,800 
C) $110,000 
D) $250,000 
E) None of these

Question 5

A NQDC plan cannot discriminate in favor of officers or other highly compensated employees.

Accepted Answer

A) True 
 B)False

Question 6

What is a highly compensated employee?

Accepted Answer

An employee is a highly compensated empl

Question 7

A defined benefit plan must reduce the $210,000 (in 2014)maximum benefits payable by one-tenth for each year of participation under 10 years that an employee has performed.

Accepted Answer

A) True 
 B)False

Question 8

On November 19,2013,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 21,2014,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 2013?
b.What amount is included in Rex's gross income in 2014?
c.What amount and type of gain is recognized by Rex in 2015?
d.What amount,if any,is deductible by Tan Company in 2014?
e.What amount,if any,is recognized in 2015 if the stock is sold for $9.50 per share?

Accepted Answer

n.No gain is recognized on the grant dat

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 21,2014,when the fair market value is $120 per share.She sells the 100 shares of stock 3 1/2 years later for $140.Determine the recognized gain on the sale and classify it as capital or ordinary.

Accepted Answer

A) $2,000 LTCG. 
B) $2,000 ordinary income. 
C) $4,000 LTCG. 
D) $4,000 ordinary income. 
E) None of these. 
A) $2,000 LTCG. 
B) $2,000 ordinary income. 
C) $4,000 LTCG. 
D) $4,000 ordinary income. 
E) None of these.

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

Pony,Inc. ,issues restricted stock to employees in July 2014,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 2014,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 2016).Sam sells his 1,000 shares in 2018 at $36 per share.What amount and type of income will Sam recognize in 2018?

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 12

On January 1,2011,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 15,2011,and sells the stock for $200 on December 20,2014.
a.Calculate the amount Gail would recognize in 2011,if any.
b.Calculate the amount Gail would recognize in 2014,if any.
c.Suppose she sells the warrant in 2015 for $39.What amount would Gail recognize?

Accepted Answer

a.Ordinary income of $30 in 20

Question 13

A direct transfer of funds from a qualified retirement plan to an IRA is subject to the withholding rules.

Accepted Answer

A) True 
 B)False

Question 14

Contributions to a Roth IRA can be made up to the due date (excluding extensions)of the taxpayer's income tax return.

Accepted Answer

A) True 
 B)False

Question 15

A restricted property plan is considered a deferred compensation plan.

Accepted Answer

A) True 
 B)False

Question 16

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 5,2014 (which is her employment anniversary date).
b.Jake,age 41,has six years of service completed as of March 2,2014 (which is his employment anniversary date).
c.Sammie,age 26,has four years of service completed as of July 21,2014 (which is his employment anniversary date).

Accepted Answer

a.60%.
b.8

Question 17

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 18

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 19

A taxpayer who receives a distribution can avoid current taxation by rolling the distribution into another qualified employer retirement plan or into an IRA.

Accepted Answer

A) True 
 B)False

Question 20

Low- and middle-income taxpayers may make nondeductible contributions up to $4,000 per child per year to a Coverdell Education Savings Account (CESA).

Accepted Answer

A) True 
 B)False

After 2008,income averaging is allowed for Federal income tax purposes.

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

In a stock bonus plan,contributions are dependent on the employer's profits.

A NQDC plan cannot discriminate in favor of officers or other highly compensated employees.

What is a highly compensated employee?

A defined benefit plan must reduce the $210,000 (in 2014)maximum benefits payable by one-tenth for each year of participation under 10 years that an employee has performed.

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

A direct transfer of funds from a qualified retirement plan to an IRA is subject to the withholding rules.

Contributions to a Roth IRA can be made up to the due date (excluding extensions)of the taxpayer's income tax return.

A restricted property plan is considered a deferred compensation plan.

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

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

A taxpayer who receives a distribution can avoid current taxation by rolling the distribution into another qualified employer retirement plan or into an IRA.

Low- and middle-income taxpayers may make nondeductible contributions up to $4,000 per child per year to a Coverdell Education Savings Account (CESA).

An Introduction to Taxation and Understanding the 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 2008,income averaging is allowed for Federal income tax purposes.

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

In a stock bonus plan,contributions are dependent on the employer's profits.

A NQDC plan cannot discriminate in favor of officers or other highly compensated employees.

What is a highly compensated employee?

A defined benefit plan must reduce the $210,000 (in 2014)maximum benefits payable by one-tenth for each year of participation under 10 years that an employee has performed.

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

A direct transfer of funds from a qualified retirement plan to an IRA is subject to the withholding rules.

Contributions to a Roth IRA can be made up to the due date (excluding extensions)of the taxpayer's income tax return.

A restricted property plan is considered a deferred compensation plan.

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

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

A taxpayer who receives a distribution can avoid current taxation by rolling the distribution into another qualified employer retirement plan or into an IRA.

Low- and middle-income taxpayers may make nondeductible contributions up to $4,000 per child per year to a Coverdell Education Savings Account (CESA).

An Introduction to Taxation and Understanding the 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