Question 1

Match each statement with the correct term below.
-Alternative minimum tax

Accepted Answer

A) A separate, parallel tax system designed to ensure a taxpayer pays some tax. 
B) A compensation tool that is based on potential price increases of the company's stock. 
C) An individual trust account maintained for the exclusive benefit of an individual or beneficiary. 
D) A type of defined contribution pension plan in which the company and the employee contribute a fixed percentage of the employee's salary to the plan. 
E) A pension plan in which the benefits are based on the number of years an employee has worked for a company and on the employee's annual salary.
F)A pension plan whose benefits are determined by the amount of contributions the employee and the company contribute to the plan and the earnings of the plan. 
A) A separate, parallel tax system designed to ensure a taxpayer pays some tax. 
B) A compensation tool that is based on potential price increases of the company's stock. 
C) An individual trust account maintained for the exclusive benefit of an individual or beneficiary. 
D) A type of defined contribution pension plan in which the company and the employee contribute a fixed percentage of the employee's salary to the plan. 
E) A pension plan in which the benefits are based on the number of years an employee has worked for a company and on the employee's annual salary.
F)A pension plan whose benefits are determined by the amount of contributions the employee and the company contribute to the plan and the earnings of the plan.

Question 2

The Rector Corporation maintains a SIMPLE-IRA retirement plan for its employees.The company has notified its employees that in 2016 it will fund the SIMPLE-IRA by matching an employee's contribution up to a maximum of 2% of the employee's salary.Avis' salary in 2016 is $240,000 and she contributes $2,800 to the plan.What amount must Avis contribute on Andorra's behalf?

Accepted Answer

A) $2,800 
B) $3,000 
C) $3,400 
D) $4,800 
E) $4,900 
A) $2,800 
B) $3,000 
C) $3,400 
D) $4,800 
E) $4,900

Question 3

Under a qualified pension plan
I.The yearly earnings on the pension plan assets are taxable income to the employee.
II.An employer's contribution is not taxable income to the employee at the time of the contribution.
​

Accepted Answer

A) Only I is correct. 
B) Only II is correct. 
C) Both statements are correct. 
D) Neither statement is correct. 
A) Only I is correct. 
B) Only II is correct. 
C) Both statements are correct. 
D) Neither statement is correct.

Question 4

A taxpayer must begin withdrawals from any type of retirement plan (except a Roth IRA)no later than April 1 of the tax year after the taxpayer reaches age 701/2 or,if later,the year they retire.

Accepted Answer

A) True 
 B)False

Question 5

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.

Accepted Answer

A) True 
 B)False

Question 6

Thomas maintains an IRA account.During the year he wins $10,000 in the state lottery and contributes it to his IRA account.Because he is an active participant in a qualified pension plan,he does not take a deduction for any part of his contribution.At the end of 2016 the total assets in the account are $30,000.Thomas is subject to a penalty on his contribution of

Accepted Answer

A) $-0- 
B) $180 
C) $270 
D) $1,000 
E) $1,800 
A) $-0- 
B) $180 
C) $270 
D) $1,000 
E) $1,800

Question 7

Sergio is a 15% partner in the Hopkins Group and has net self-employment income of $100,000 in 2016.The maximum amount that Sergio can contribute to a Keogh money purchase plan is

Accepted Answer

A) $3,000 
B) $13,045 
C) $20,000 
D) $25,000 
E) $50,000 
A) $3,000 
B) $13,045 
C) $20,000 
D) $25,000 
E) $50,000

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

In 2011,Merlin received the right to acquire 1,200 shares of Noble Corporation stock through the company's incentive stock option plan at an exercise price of $17 per share.On January 4,2016,Merlin exercises the option when the fair market value of the stock is $22 per share.Which of the following is(are)correct statements?
I.Noble can deduct $6,000 as compensation expense in 2016.
II.Merlin does not recognize any income but must include $6,000 as a tax preference item in computing his alternative minimum taxable income.
​

Accepted Answer

A) Only statement I is correct. 
B) Only statement II is correct. 
C) Both statements are correct. 
D) Neither statement is correct. 
A) Only statement I is correct. 
B) Only statement II is correct. 
C) Both statements are correct. 
D) Neither statement is correct.

Question 10

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.
​

Accepted Answer

A) Only statement I is correct. 
B) Only statement II is correct. 
C) Both statements are correct. 
D) Neither statement is correct. 
A) Only statement I is correct. 
B) Only statement II is correct. 
C) Both statements are correct. 
D) Neither statement is correct.

Question 11

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.
​

Accepted Answer

A) Only statement I is correct. 
B) Only statement II is correct. 
C) Both statements are correct. 
D) Neither statement is correct. 
A) Only statement I is correct. 
B) Only statement II is correct. 
C) Both statements are correct. 
D) Neither statement is correct.

Question 12

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

Accepted Answer

A) $67,000 
B) $70,000 
C) $159,750 
D) $210,000 
E) $280,000 
A) $67,000 
B) $70,000 
C) $159,750 
D) $210,000 
E) $280,000

Question 13

On February 19,2014,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 23,2015,when the fair market value of the stock is $19.He makes a Section 83(b)election at the exercise date.On September 23,2016,the fair market value of the stock is $25 per share.How much must he report as income in 2016?

Accepted Answer

A) $-0- 
B) $1,200 
C) $1,800 
D) $2,000 
E) $3,000 
A) $-0- 
B) $1,200 
C) $1,800 
D) $2,000 
E) $3,000

Question 14

Which of the following statements are correct concerning the general business credit?
I.The general business tax credit only applies to an individual or corporation with a tax liability in excess of $100,000.
II.The general business credit only applies to an individual or corporation that has a tax credit carryover or can claim more than one general business credit during the year.
​

Accepted Answer

A) Only statement I is correct. 
B) Only statement II is correct. 
C) Both statements are correct. 
D) Neither statement is correct. 
A) Only statement I is correct. 
B) Only statement II is correct. 
C) Both statements are correct. 
D) Neither statement is correct.

Question 15

The maximum contribution that can be made on behalf of an employee in a Keogh defined contribution money purchase plan is:

Accepted Answer

A) The lower of 15% of employee's taxable compensation or $53,000 
B) The lower of 13.0435% of employee's taxable compensation or $53,000 
C) The lower of 20% of employee's taxable compensation or $53,000 
D) The lower of 25% of employee's taxable compensation or $53,000 
A) The lower of 15% of employee's taxable compensation or $53,000 
B) The lower of 13.0435% of employee's taxable compensation or $53,000 
C) The lower of 20% of employee's taxable compensation or $53,000 
D) The lower of 25% of employee's taxable compensation or $53,000

Question 16

To obtain the rehabilitation expenditures tax credit certain criteria must be satisfied.Which of the following are correct statements about the credit?
I.If the rehabilitated structure is sold before the end of the ten-year period following the year of the tax credit,recapture occurs.
II.The amount of the credit can be either 10% or 20% of qualified expenditures,depending on the classification of the building.
​

Accepted Answer

A) Only statement I is correct. 
B) Only statement II is correct. 
C) Both statements are correct. 
D) Neither statement is correct. 
A) Only statement I is correct. 
B) Only statement II is correct. 
C) Both statements are correct. 
D) Neither statement is correct.

Question 17

When calculating AMTI,individual taxpayers must add back the following:
I.Miscellaneous itemized deductions subject to the 2% limitation.
II.Personal exemption amounts.
​

Accepted Answer

A) Only statement I is correct. 
B) Only statement II is correct. 
C) Both statements are correct. 
D) Neither statement is correct. 
A) Only statement I is correct. 
B) Only statement II is correct. 
C) Both statements are correct. 
D) Neither statement is correct.

Question 18

Lynne is a 15% partner with Webb Brothers and has net self-employment income of $100,000 in 2016.The maximum amount that Lynne can contribute to a Keogh profit sharing plan is

Accepted Answer

A) $5,000 
B) $13,045 
C) $15,000 
D) $20,000 
E) $25,000 
A) $5,000 
B) $13,045 
C) $15,000 
D) $20,000 
E) $25,000

Question 19

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?

Accepted Answer

A) $- 0 - 
B) $1,000 
C) $3,100 
D) $5,000 
E) $6,600 
A) $- 0 - 
B) $1,000 
C) $3,100 
D) $5,000 
E) $6,600

Question 20

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.
​

Accepted Answer

A) Only statement I is correct. 
B) Only statement II is correct. 
C) Only statement III is correct. 
D) Statements I, II, and III are correct. 
A) Only statement I is correct. 
B) Only statement II is correct. 
C) Only statement III is correct. 
D) Statements I, II, and III are correct.

Match each statement with the correct term below. -Alternative minimum tax

Under a qualified pension plan I.The yearly earnings on the pension plan assets are taxable income to the employee. II.An employer's contribution is not taxable income to the employee at the time of the contribution.

A taxpayer must begin withdrawals from any type of retirement plan (except a Roth IRA)no later than April 1 of the tax year after the taxpayer reaches age 70¹/₂ or,if later,the year they retire.

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.

Sergio is a 15% partner in the Hopkins Group and has net self-employment income of $100,000 in 2016.The maximum amount that Sergio can contribute to a Keogh money purchase plan is

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

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

The maximum contribution that can be made on behalf of an employee in a Keogh defined contribution money purchase plan is:

When calculating AMTI,individual taxpayers must add back the following: I.Miscellaneous itemized deductions subject to the 2% limitation. II.Personal exemption amounts.

Lynne is a 15% partner with Webb Brothers and has net self-employment income of $100,000 in 2016.The maximum amount that Lynne can contribute to a Keogh profit sharing plan is

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?

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.

Federal Income Taxation-An Overview

Income Tax Concepts

Income Sources

Income Exclusions

Introduction to Business Expenses

Business Expenses

Losses-Deductions and Limitations

Taxation of Individuals

Acquisitions of Property

Cost Recovery on Property: Depreciation, depletion, and Amortization

Property Dispositions

Non-Recognition Transactions

Choice of Business Entity-General Tax and Nontax Factorsformation

Choice of Business Entity-Operations and Distributions

Tax Research

Filters

Exam 15: Choice of Business Entity-Other Considerations

Match each statement with the correct term below. -Alternative minimum tax

Under a qualified pension plan I.The yearly earnings on the pension plan assets are taxable income to the employee. II.An employer's contribution is not taxable income to the employee at the time of the contribution. ​

A taxpayer must begin withdrawals from any type of retirement plan (except a Roth IRA)no later than April 1 of the tax year after the taxpayer reaches age 701/2 or,if later,the year they retire.

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.

Sergio is a 15% partner in the Hopkins Group and has net self-employment income of $100,000 in 2016.The maximum amount that Sergio can contribute to a Keogh money purchase plan is

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

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

The maximum contribution that can be made on behalf of an employee in a Keogh defined contribution money purchase plan is:

When calculating AMTI,individual taxpayers must add back the following: I.Miscellaneous itemized deductions subject to the 2% limitation. II.Personal exemption amounts. ​

Lynne is a 15% partner with Webb Brothers and has net self-employment income of $100,000 in 2016.The maximum amount that Lynne can contribute to a Keogh profit sharing plan is

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?

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. ​

Federal Income Taxation-An Overview

Income Tax Concepts

Income Sources

Income Exclusions

Introduction to Business Expenses

Business Expenses

Losses-Deductions and Limitations

Taxation of Individuals

Acquisitions of Property

Cost Recovery on Property: Depreciation, depletion, and Amortization

Property Dispositions

Non-Recognition Transactions

Choice of Business Entity-General Tax and Nontax Factorsformation

Choice of Business Entity-Operations and Distributions

Tax Research

Filters

Under a qualified pension plan I.The yearly earnings on the pension plan assets are taxable income to the employee. II.An employer's contribution is not taxable income to the employee at the time of the contribution.

A taxpayer must begin withdrawals from any type of retirement plan (except a Roth IRA)no later than April 1 of the tax year after the taxpayer reaches age 70¹/₂ or,if later,the year they retire.

When calculating AMTI,individual taxpayers must add back the following: I.Miscellaneous itemized deductions subject to the 2% limitation. II.Personal exemption amounts.

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.