Question 1

Income earned by a qualified pension plan trust grows at a tax-free rate.

Accepted Answer

A) True 
 B)False

Question 2

On February 20,2012,Tom (an executive of Hawk Corporation)purchased 100 shares of Hawk stock (selling at $20 a share)for $4 a share.A condition of the transaction was that Tom must resell the stock to Hawk at cost if he voluntarily leaves the company within five years of receiving the stock (assume this represents a substantial risk of forfeiture).

Accepted Answer

The answer of On February 20,2012,Tom (an executive of Hawk...

Question 3

Nick negotiates a $4.5 million contract per year with a major college football program to become its head coach.What amount is deductible by the program in 2012 his first full year of employment.

Accepted Answer

A)  None. 
B)  $1,000,000. 
C)  $3,000,000. 
D)  $4,500,000. 
E)  None of the above. 
A)  None. 
B)  $1,000,000. 
C)  $3,000,000. 
D)  $4,500,000. 
E)  None of the above.

Question 4

Danielle,who is retired,reaches age 70 1/2 in 2011,and she will also be age 71 in 2011.She has a $150,000 balance in her traditional IRA.If her life expectancy is 15.3 years,what distribution,if any,must be made by April 1,2012?

Accepted Answer

A)  $0. 
B)  $9,804. 
C)  $19,608. 
D)  $150,000. 
E)  None of the above. 
A)  $0. 
B)  $9,804. 
C)  $19,608. 
D)  $150,000. 
E)  None of the above.

Question 5

A failure to make a minimum required distribution to a participant in any taxable year results in a 50% nondeductible excise tax on any excess of the amount that should have been distributed over the amount that actually was distributed.

Accepted Answer

A) True 
 B)False

Question 6

In a direct transfer from one qualified retirement plan to another qualified retirement plan,the employer must withhold 20% of the amount of the direct transfer.

Accepted Answer

A) True 
 B)False

Question 7

Amit decides to defer 20% of his $340,000 salary from Maroon,Inc.,under a nonqualified deferred compensation plan for 10 years.Maroon,Inc.,has a marginal tax rate of 34% and can earn approximately 7% after-tax return over the next 10 years.Compute any tax ramifications.

Accepted Answer

With a marginal tax rate of 34%,Maroon h

Question 8

Beth,age 51,has a traditional deductible IRA with an account balance of $221,419 of which $160,400 represents contributions and $61,019 represents earnings.In 2012,she converts her traditional IRA into a Roth IRA.What amount,if any,must Beth include in her gross income in 2012?

Accepted Answer

A)  $0. 
B)  $61,019. 
C)  $160,400. 
D)  $221,419. 
E)  None of the above. 
A)  $0. 
B)  $61,019. 
C)  $160,400. 
D)  $221,419. 
E)  None of the above.

Question 9

Elvis receives a $2,000 distribution from a CESA.On this date,the total balance is $30,000,with $12,000 representing earnings.If his qualified higher education expenses are $2,195,what amount can he exclude from gross income?

Accepted Answer

A)  $0. 
B)  $800. 
C)  $1,200. 
D)  $2,000. 
E)  Some other amount. 
A)  $0. 
B)  $800. 
C)  $1,200. 
D)  $2,000. 
E)  Some other amount.

Question 10

Frank established a Roth IRA at age 25 and contributed a total of $131,244 to it over 38 years.The account is now worth $376,000.How much of these funds can Frank withdraw tax-free?

Accepted Answer

A)  $0. 
B)  $131,244. 
C)  $244,756. 
D)  $376,000. 
E)  None of the above. 
A)  $0. 
B)  $131,244. 
C)  $244,756. 
D)  $376,000. 
E)  None of the above.

Question 11

If the special election under § 83(b)is made as a result of a restricted property transaction,which statement is false?

Accepted Answer

A)  A factor supporting making the § 83(b) election is the expectation the property will appreciate substantially. 
B)  Ordinary income is recognized on the excess of the FMV over the amount paid for the property on the date received. 
C)  Any appreciation on the property after receipt is treated as capital gain. 
D)  A deduction is allowed to the employee for any taxes paid on the original amount included in gross income if the property is subsequently forfeited. 
E)  None of the above is false. 
A)  A factor supporting making the § 83(b) election is the expectation the property will appreciate substantially. 
B)  Ordinary income is recognized on the excess of the FMV over the amount paid for the property on the date received. 
C)  Any appreciation on the property after receipt is treated as capital gain. 
D)  A deduction is allowed to the employee for any taxes paid on the original amount included in gross income if the property is subsequently forfeited. 
E)  None of the above is false.

Question 12

A major disadvantage of a NQSO is that an employee must recognize ordinary income on the exercise of the option or at the date of the grant without receiving cash to pay the tax.

Accepted Answer

A) True 
 B)False

Question 13

What is the maximum amount Velvia can contribute to a Coverdell Education Savings Account (CESA)on behalf of a grandson in 2012? She is single with an AGI of $99,000.

Accepted Answer

A)  $0. 
B)  $500. 
C)  $1,467. 
D)  $2,000. 
E)  None of the above. 
A)  $0. 
B)  $500. 
C)  $1,467. 
D)  $2,000. 
E)  None of the above.

Question 14

Which is not considered to be a fringe benefit?

Accepted Answer

A)  Tax deferred annuities. 
B)  Group legal service 
C)  Group term life insurance. 
D)  Qualified transportation benefit. 
E)  All of the above are fringe benefits. 
A)  Tax deferred annuities. 
B)  Group legal service 
C)  Group term life insurance. 
D)  Qualified transportation benefit. 
E)  All of the above are fringe benefits.

Question 15

Which statement is not true with respect to golden parachute payments?

Accepted Answer

A)  Refers to excess severance pay. 
B)  Does include payments from a qualified profit sharing plan. 
C)  A deduction is denied to the employer. 
D)  A 20% excise tax is imposed on the recipient. 
E)  All of the above are true. 
A)  Refers to excess severance pay. 
B)  Does include payments from a qualified profit sharing plan. 
C)  A deduction is denied to the employer. 
D)  A 20% excise tax is imposed on the recipient. 
E)  All of the above are true.

Question 16

Larry negotiates a $2.5 million contract with Red,Inc.,a publicly-held corporation that receives TARP funds,to become their CEO for 2012.What amount is deductible by Red,Inc.in 2012?

Accepted Answer

A)  $0. 
B)  $1,000,000. 
C)  $2,064,000. 
D)  $2,500,000. 
E)  None of the above. 
A)  $0. 
B)  $1,000,000. 
C)  $2,064,000. 
D)  $2,500,000. 
E)  None of the above.

Question 17

Ebony,Inc.,uses the three-to-seven year graded vesting approach for its retirement plan.Pete has five years of service completed as of February 5,2012,his employment anniversary date.Determine Pete's nonforfeitable percentage.

Accepted Answer

A)  40%. 
B)  60%. 
C)  80%. 
D)  100%. 
E)  None of the above. 
A)  40%. 
B)  60%. 
C)  80%. 
D)  100%. 
E)  None of the above.

Question 18

In order to postpone income tax obligations as long as possible,retirement assets should be taken from which assets (or accounts)first?

Accepted Answer

A)  Section 457 accounts of government employees since no penalties apply once the employee is separated from employment. 
B)  Section 401(k) and nonprofit § 403(b) plans because the age 55 separation rule may apply. 
C)  Traditional IRAs since a taxpayer must be at least age 59 1/2 to obtain penalty-free withdrawals. 
D)  Roth IRAs since no required minimum distribution rules apply. 
E)  Taxable accounts. 
A)  Section 457 accounts of government employees since no penalties apply once the employee is separated from employment. 
B)  Section 401(k) and nonprofit § 403(b) plans because the age 55 separation rule may apply. 
C)  Traditional IRAs since a taxpayer must be at least age 59 1/2 to obtain penalty-free withdrawals. 
D)  Roth IRAs since no required minimum distribution rules apply. 
E)  Taxable accounts.

Question 19

Contributions to a qualified pension plan are immediately deductible by the employer.

Accepted Answer

A) True 
 B)False

Question 20

Jeff,age 43,establishes a traditional IRA in 2012 and contributes $5,400 in cash to the plan.He has earned income of $30,600.What is the amount of the penalty tax that Jeff will incur,if any,assuming he keeps the $5,400 in the account?

Accepted Answer

A)  $0. 
B)  $24. 
C)  $40. 
D)  $400. 
E)  None of the above. 
A)  $0. 
B)  $24. 
C)  $40. 
D)  $400. 
E)  None of the above.

Income earned by a qualified pension plan trust grows at a tax-free rate.

Nick negotiates a $4.5 million contract per year with a major college football program to become its head coach.What amount is deductible by the program in 2012 his first full year of employment.

Danielle,who is retired,reaches age 70 1/2 in 2011,and she will also be age 71 in 2011.She has a $150,000 balance in her traditional IRA.If her life expectancy is 15.3 years,what distribution,if any,must be made by April 1,2012?

A failure to make a minimum required distribution to a participant in any taxable year results in a 50% nondeductible excise tax on any excess of the amount that should have been distributed over the amount that actually was distributed.

In a direct transfer from one qualified retirement plan to another qualified retirement plan,the employer must withhold 20% of the amount of the direct transfer.

Amit decides to defer 20% of his $340,000 salary from Maroon,Inc.,under a nonqualified deferred compensation plan for 10 years.Maroon,Inc.,has a marginal tax rate of 34% and can earn approximately 7% after-tax return over the next 10 years.Compute any tax ramifications.

Beth,age 51,has a traditional deductible IRA with an account balance of $221,419 of which $160,400 represents contributions and $61,019 represents earnings.In 2012,she converts her traditional IRA into a Roth IRA.What amount,if any,must Beth include in her gross income in 2012?

Elvis receives a $2,000 distribution from a CESA.On this date,the total balance is $30,000,with $12,000 representing earnings.If his qualified higher education expenses are $2,195,what amount can he exclude from gross income?

Frank established a Roth IRA at age 25 and contributed a total of $131,244 to it over 38 years.The account is now worth $376,000.How much of these funds can Frank withdraw tax-free?

If the special election under § 83(b)is made as a result of a restricted property transaction,which statement is false?

A major disadvantage of a NQSO is that an employee must recognize ordinary income on the exercise of the option or at the date of the grant without receiving cash to pay the tax.

What is the maximum amount Velvia can contribute to a Coverdell Education Savings Account (CESA)on behalf of a grandson in 2012? She is single with an AGI of $99,000.

Which is not considered to be a fringe benefit?

Which statement is not true with respect to golden parachute payments?

Larry negotiates a $2.5 million contract with Red,Inc.,a publicly-held corporation that receives TARP funds,to become their CEO for 2012.What amount is deductible by Red,Inc.in 2012?

Ebony,Inc.,uses the three-to-seven year graded vesting approach for its retirement plan.Pete has five years of service completed as of February 5,2012,his employment anniversary date.Determine Pete's nonforfeitable percentage.

In order to postpone income tax obligations as long as possible,retirement assets should be taken from which assets (or accounts)first?

Contributions to a qualified pension plan are immediately deductible by the employer.

Jeff,age 43,establishes a traditional IRA in 2012 and contributes $5,400 in cash to the plan.He has earned income of $30,600.What is the amount of the penalty tax that Jeff will incur,if any,assuming he keeps the $5,400 in the account?

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: Section 1231 and Recapture Provisions

Accounting Periods and Methods

Corporations and Partnerships

Filters

Exam 19: Deferred Compensation

Income earned by a qualified pension plan trust grows at a tax-free rate.

Nick negotiates a $4.5 million contract per year with a major college football program to become its head coach.What amount is deductible by the program in 2012 his first full year of employment.

Danielle,who is retired,reaches age 70 1/2 in 2011,and she will also be age 71 in 2011.She has a $150,000 balance in her traditional IRA.If her life expectancy is 15.3 years,what distribution,if any,must be made by April 1,2012?

A failure to make a minimum required distribution to a participant in any taxable year results in a 50% nondeductible excise tax on any excess of the amount that should have been distributed over the amount that actually was distributed.

In a direct transfer from one qualified retirement plan to another qualified retirement plan,the employer must withhold 20% of the amount of the direct transfer.

Amit decides to defer 20% of his $340,000 salary from Maroon,Inc.,under a nonqualified deferred compensation plan for 10 years.Maroon,Inc.,has a marginal tax rate of 34% and can earn approximately 7% after-tax return over the next 10 years.Compute any tax ramifications.

Beth,age 51,has a traditional deductible IRA with an account balance of $221,419 of which $160,400 represents contributions and $61,019 represents earnings.In 2012,she converts her traditional IRA into a Roth IRA.What amount,if any,must Beth include in her gross income in 2012?

Elvis receives a $2,000 distribution from a CESA.On this date,the total balance is $30,000,with $12,000 representing earnings.If his qualified higher education expenses are $2,195,what amount can he exclude from gross income?

Frank established a Roth IRA at age 25 and contributed a total of $131,244 to it over 38 years.The account is now worth $376,000.How much of these funds can Frank withdraw tax-free?

If the special election under § 83(b)is made as a result of a restricted property transaction,which statement is false?

A major disadvantage of a NQSO is that an employee must recognize ordinary income on the exercise of the option or at the date of the grant without receiving cash to pay the tax.

What is the maximum amount Velvia can contribute to a Coverdell Education Savings Account (CESA)on behalf of a grandson in 2012? She is single with an AGI of $99,000.

Which is not considered to be a fringe benefit?

Which statement is not true with respect to golden parachute payments?

Larry negotiates a $2.5 million contract with Red,Inc.,a publicly-held corporation that receives TARP funds,to become their CEO for 2012.What amount is deductible by Red,Inc.in 2012?

Ebony,Inc.,uses the three-to-seven year graded vesting approach for its retirement plan.Pete has five years of service completed as of February 5,2012,his employment anniversary date.Determine Pete's nonforfeitable percentage.

In order to postpone income tax obligations as long as possible,retirement assets should be taken from which assets (or accounts)first?

Contributions to a qualified pension plan are immediately deductible by the employer.

Jeff,age 43,establishes a traditional IRA in 2012 and contributes $5,400 in cash to the plan.He has earned income of $30,600.What is the amount of the penalty tax that Jeff will incur,if any,assuming he keeps the $5,400 in the account?

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: Section 1231 and Recapture Provisions

Accounting Periods and Methods

Corporations and Partnerships

Filters