Question 1

Match each statement with the correct term below.
-IRA

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

Under a nonqualified pension plan
I.The yearly earnings on the pension plan assets are taxable income to the employee.
II.An employer's contribution is 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 3

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?

Accepted Answer

A) $35,000 
B) $64,000 
C) $80,000 
D) $100,000 
E) $125,000 
A) $35,000 
B) $64,000 
C) $80,000 
D) $100,000 
E) $125,000

Question 4

Ann is the sole owner of a computer store and established a simplified employee pension plan (SEP)for herself and her two full-time employees.Her net self-employment income for the year is $70,000.The maximum amount she can contribute to her SEP is

Accepted Answer

A) $9,130 
B) $10,500 
C) $14,000 
D) $17,500 
E) $49,000 
A) $9,130 
B) $10,500 
C) $14,000 
D) $17,500 
E) $49,000

Question 5

Kyle is 31 years old,single,self-employed,and has no qualified pension plan.His net self-employment income is $35,000 and he contributes the maximum amount to his IRA account during the current year.How much can Kyle deduct for AGI this year?

Accepted Answer

A) $- 0 - 
B) $1,500 
C) $3,000 
D) $4,000 
E) $5,500 
A) $- 0 - 
B) $1,500 
C) $3,000 
D) $4,000 
E) $5,500

Question 6

On January 3,2016,Great Spirit Inc.,grants Jordan a nonqualified stock option to acquire 1,000 shares of the company's stock for $12 per share.The fair market price of the stock on the date of grant is $15.The option does not have a readily ascertainable fair market value.On October 1,2016,when the fair market value of the stock is $18,Jordan exercises the stock option.Determine the tax consequences for Jordan and Great Spirit Inc.,on the grant date of the option and the exercise date.

Accepted Answer

An employee who receives an option that

Question 7

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
​

Accepted Answer

A) Only statement I is correct. 
B) Statements II and III are correct. 
C) Statements I and IV are correct. 
D) Statements I, III, and IV are correct. 
E) None of the above are correct. 
A) Only statement I is correct. 
B) Statements II and III are correct. 
C) Statements I and IV are correct. 
D) Statements I, III, and IV are correct. 
E) None of the above are correct.

Question 8

In 2016,Billie decides to purchase a house by withdrawing $15,000 from his IRA.Brandan 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

Accepted Answer

A) $-0- 
B) $240 
C) $500 
D) $1,260 
E) $1,500 
A) $-0- 
B) $240 
C) $500 
D) $1,260 
E) $1,500

Question 9

Which of the following itemized deductions is not allowed for AMT purposes?

Accepted Answer

A) State income taxes. 
B) Qualified housing interest. 
C) Investment interest. 
D) Interest on home equity loan where loan proceeds are used to improve the residence. 
E) Charitable contributions. 
A) State income taxes. 
B) Qualified housing interest. 
C) Investment interest. 
D) Interest on home equity loan where loan proceeds are used to improve the residence. 
E) Charitable contributions.

Question 10

On September 15,2016,Spiral Corporation grants Jay an option to acquire 250 shares of the company's stock for $10 per share.The fair market price of the stock on the date of grant is $14.The option does not have a readily ascertainable fair market value.How much must Jay report as income at the date of grant?

Accepted Answer

A) $-0- 
B) $1,000 
C) $2,500 
D) $3,500 
A) $-0- 
B) $1,000 
C) $2,500 
D) $3,500

Question 11

Karl is scheduled to receive an annuity distribution of $10,000 from his pension plan in 2016.Due to his recent success in the stock market,he has requested that he receive only $5,000 in 2016.Because Karl will fail to receive the required annuity distribution in 2016,he is subject to a penalty of

Accepted Answer

A) $-0- 
B) $500 
C) $1,000 
D) $2,500 
E) $5,000 
A) $-0- 
B) $500 
C) $1,000 
D) $2,500 
E) $5,000

Question 12

Tim has a 25% interest in Hill and Associates,a partnership.Tim is eligible for coverage as an employee under the firm's qualified pension plan.

Accepted Answer

A) True 
 B)False

Question 13

When calculating AMTI,individual taxpayers must add back the following:
I.Charitable contributions.
II.Qualified home mortgage interest.
​

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 14

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
​
​

Accepted Answer

The answer of Karen receives the right to acquire 400...

Question 15

Which of the following is (are)AMT tax preference item(s)?
I.Tax-exempt interest from private activity bonds.
II.Percentage depletion in excess of basis.
​

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 16

For the current year,Salvador's regular tax liability is $17,000,and his tentative alternative minimum tax is $19,000.Salvador has $16,250 withheld from his salary.
I.Salvador has a tax due of $750.
II.Salvador's alternative minimum tax is $0.
III.Salvador has a tax due of $2,750.
IV.Salvador's total tax liability is $19,000
​

Accepted Answer

A) Statements I and II are correct. 
B) Statements II and III are correct. 
C) Statements I, II and IV are correct. 
D) Statements III and IV are correct. 
E) Statements II, III and IV are correct 
A) Statements I and II are correct. 
B) Statements II and III are correct. 
C) Statements I, II and IV are correct. 
D) Statements III and IV are correct. 
E) Statements II, III and IV are correct

Question 17

Unmarried taxpayers who are not active participants in a pension plan are allowed to deduct their entire contribution to an IRA regardless of the amount of their adjusted gross income.

Accepted Answer

A) True 
 B)False

Question 18

Cary is an employee with the Bayview Corporation.Bayview maintains a defined contribution plan for all its employees.Determine the maximum deductible contribution Bayview can make to the pension plan in each of the following situations:
a.Cary's salary is $90,000.
b.Cary's salary is $220,000.

Accepted Answer

The answer of Cary is an employee with the Bayview...

Question 19

Dunn Company bought an old building in downtown Lafayette for $75,000.The land was not purchased; it is being leased.The building was originally placed into service in 1918.Dunn spends $100,000 to rehabilitate the building with the intent to develop a microbrewery on the site.The company retained 80% of the external and internal walls and framework.Assume the amount of the older building rehabilitation credit Dunn can claim is $10,000.What is the basis in the building for depreciation purposes?

Accepted Answer

A) $100,000 
B) $145,000 
C) $105,000 
D) $165,000 
E) $175,000 
A) $100,000 
B) $145,000 
C) $105,000 
D) $165,000 
E) $175,000

Question 20

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.

Accepted Answer

The answer of Jane is a partner with Smithstone LLP.Smithstone...

Match each statement with the correct term below. -IRA

Under a nonqualified pension plan I.The yearly earnings on the pension plan assets are taxable income to the employee. II.An employer's contribution is taxable income to the employee at the time of the contribution.

Ann is the sole owner of a computer store and established a simplified employee pension plan (SEP)for herself and her two full-time employees.Her net self-employment income for the year is $70,000.The maximum amount she can contribute to her SEP is

Kyle is 31 years old,single,self-employed,and has no qualified pension plan.His net self-employment income is $35,000 and he contributes the maximum amount to his IRA account during the current year.How much can Kyle deduct for AGI this year?

In 2016,Billie decides to purchase a house by withdrawing $15,000 from his IRA.Brandan 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

Which of the following itemized deductions is not allowed for AMT purposes?

Karl is scheduled to receive an annuity distribution of $10,000 from his pension plan in 2016.Due to his recent success in the stock market,he has requested that he receive only $5,000 in 2016.Because Karl will fail to receive the required annuity distribution in 2016,he is subject to a penalty of

Tim has a 25% interest in Hill and Associates,a partnership.Tim is eligible for coverage as an employee under the firm's qualified pension plan.

When calculating AMTI,individual taxpayers must add back the following: I.Charitable contributions. II.Qualified home mortgage interest.

Which of the following is (are)AMT tax preference item(s)? I.Tax-exempt interest from private activity bonds. II.Percentage depletion in excess of basis.

Unmarried taxpayers who are not active participants in a pension plan are allowed to deduct their entire contribution to an IRA regardless of the amount of their adjusted gross income.

Cary is an employee with the Bayview Corporation.Bayview maintains a defined contribution plan for all its employees.Determine the maximum deductible contribution Bayview can make to the pension plan in each of the following situations: a.Cary's salary is $90,000. b.Cary's salary is $220,000.

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. -IRA

Under a nonqualified pension plan I.The yearly earnings on the pension plan assets are taxable income to the employee. II.An employer's contribution is taxable income to the employee at the time of the contribution. ​

Ann is the sole owner of a computer store and established a simplified employee pension plan (SEP)for herself and her two full-time employees.Her net self-employment income for the year is $70,000.The maximum amount she can contribute to her SEP is

Kyle is 31 years old,single,self-employed,and has no qualified pension plan.His net self-employment income is $35,000 and he contributes the maximum amount to his IRA account during the current year.How much can Kyle deduct for AGI this year?

In 2016,Billie decides to purchase a house by withdrawing $15,000 from his IRA.Brandan 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

Which of the following itemized deductions is not allowed for AMT purposes?

Karl is scheduled to receive an annuity distribution of $10,000 from his pension plan in 2016.Due to his recent success in the stock market,he has requested that he receive only $5,000 in 2016.Because Karl will fail to receive the required annuity distribution in 2016,he is subject to a penalty of

Tim has a 25% interest in Hill and Associates,a partnership.Tim is eligible for coverage as an employee under the firm's qualified pension plan.

When calculating AMTI,individual taxpayers must add back the following: I.Charitable contributions. II.Qualified home mortgage interest. ​

Which of the following is (are)AMT tax preference item(s)? I.Tax-exempt interest from private activity bonds. II.Percentage depletion in excess of basis. ​

Unmarried taxpayers who are not active participants in a pension plan are allowed to deduct their entire contribution to an IRA regardless of the amount of their adjusted gross income.

Cary is an employee with the Bayview Corporation.Bayview maintains a defined contribution plan for all its employees.Determine the maximum deductible contribution Bayview can make to the pension plan in each of the following situations: a.Cary's salary is $90,000. b.Cary's salary is $220,000.

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 nonqualified pension plan I.The yearly earnings on the pension plan assets are taxable income to the employee. II.An employer's contribution is taxable income to the employee at the time of the contribution.

When calculating AMTI,individual taxpayers must add back the following: I.Charitable contributions. II.Qualified home mortgage interest.

Which of the following is (are)AMT tax preference item(s)? I.Tax-exempt interest from private activity bonds. II.Percentage depletion in excess of basis.