Question 1

Group term life insurance is considered to be a type of deferred compensation.

Accepted Answer

A) True 
 B)False

Question 2

What statement is false with respect to an incentive stock option (ISO)?

Accepted Answer

A)  To qualify as an ISO, the option price must equal or exceed the fair market value of the stock at the time the option is granted. 
B)  The spread is not subject to the alternative minimum tax. 
C)  If the employee meets the holding period requirement, the employer does not obtain a business deduction. 
D)  The spread is the excess of the FMV of the share at the date of exercise over the option price. 
E)  None of the above are false. 
A)  To qualify as an ISO, the option price must equal or exceed the fair market value of the stock at the time the option is granted. 
B)  The spread is not subject to the alternative minimum tax. 
C)  If the employee meets the holding period requirement, the employer does not obtain a business deduction. 
D)  The spread is the excess of the FMV of the share at the date of exercise over the option price. 
E)  None of the above are false.

Question 3

Traditional IRA contributions made after an individual reaches the age of 59 1/2 are treated as excess contributions and are subject to a nondeductible 6% excise penalty tax.

Accepted Answer

A) True 
 B)False

Question 4

The $1 million limitation for deductible executive compensation does not apply to the alternative minimum tax.

Accepted Answer

A) True 
 B)False

Question 5

Any pre-tax amount elected by an employee as a plan contribution to a § 401(k)plan that does not exceed the statutory limit is not includible in gross income in the year of deferral and is 100% vested.

Accepted Answer

A) True 
 B)False

Question 6

What is a profit sharing plan?

Accepted Answer

A profit sharing plan is a deferred comp

Question 7

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 8

A direct transfer of funds from a qualified retirement plan to an IRA is not subject to the withholding rules.

Accepted Answer

A) True 
 B)False

Question 9

Dana,age 48,is the sole remaining participant of a money purchase pension plan.The plan is terminated and a $240,000 taxable distribution is made to Dana.The early distribution penalty tax,if any,for 2012 is:

Accepted Answer

A)  $0. 
B)  $12,000. 
C)  $24,000. 
D)  $30,000. 
E)  None of the above. 
A)  $0. 
B)  $12,000. 
C)  $24,000. 
D)  $30,000. 
E)  None of the above.

Question 10

What is a defined contribution plan?

Accepted Answer

A defined contribution pension plan (or

Question 11

Roxy,Inc.,grants 1,000 NQSO to an employee,Carol,entitling her to purchase Roxy stock at $10 per share (the current price of the stock).Roxy simultaneously grants 1,000 ISOs to another employee,Donna,entitling her to buy 1,000 shares of Roxy at $10 per share over a two-year period.One year later,2012,the stock has risen to $20 per share,and Carol and Donna both exercise their options in full,receiving stock not subject to an SRF.

Accepted Answer

The answer of Roxy,Inc.,grants 1,000 NQSO to an employee,Carol,entitling her...

Question 12

Harry receives a $10,000 distribution from a CESA.On this date,his total account balance is $16,000,with $4,000 representing earnings.If his qualified higher education expenses are $8,000,the amount included in gross income is:

Accepted Answer

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

Question 13

A NQDC plan may discriminate in favor of officers or other highly compensated employees.

Accepted Answer

A) True 
 B)False

Question 14

Pony,Inc.,issues restricted stock to employees in July 2012,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 the stock is issued.An employee,Sam,decides to make the § 83(b)election with his 1,000 shares.At the end of 2012,the stock is trading at $13 per share.How much income,if any,must Sam recognize in 2012?

Accepted Answer

A)  $0. 
B)  $10,000 capital gain. 
C)  $10,000 ordinary income. 
D)  $13,000 capital gain. 
E)  $13,000 ordinary income. 
A)  $0. 
B)  $10,000 capital gain. 
C)  $10,000 ordinary income. 
D)  $13,000 capital gain. 
E)  $13,000 ordinary income.

Question 15

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 16

Fred is a self-employed accountant with gross earned income of $140,000 per year (after the deduction for one-half of any self-employment tax).He has a profit sharing plan (i.e.,defined contribution plan).What is the maximum amount Fred can contribute to his retirement plan?

Accepted Answer

A)  $28,000. 
B)  $35,000. 
C)  $40,000. 
D)  $140,000. 
E)  None of the above. 
A)  $28,000. 
B)  $35,000. 
C)  $40,000. 
D)  $140,000. 
E)  None of the above.

Question 17

The minimum annual distributions must be made over the life of the participant or the life of the participant and a designated individual beneficiary.

Accepted Answer

A) True 
 B)False

Question 18

Susan,an executive,receives a golden parachute payment of $500,000 from her employer.Her average annual compensation for the most recent five years is $100,000.Which of the following statements is correct?

Accepted Answer

A)  The disallowed deduction to the employer is $500,000, and the excise tax to Susan is $100,000. 
B)  The disallowed deduction to the employer is $400,000, and the excise tax to Susan is $80,000. 
C)  The disallowed deduction to the employer is $100,000, and the excise tax to Susan is $20,000. 
D)  The disallowed deduction to the employer is $100,000, and the excise tax to Susan is zero. 
E)  None of the above. 
A)  The disallowed deduction to the employer is $500,000, and the excise tax to Susan is $100,000. 
B)  The disallowed deduction to the employer is $400,000, and the excise tax to Susan is $80,000. 
C)  The disallowed deduction to the employer is $100,000, and the excise tax to Susan is $20,000. 
D)  The disallowed deduction to the employer is $100,000, and the excise tax to Susan is zero. 
E)  None of the above.

Question 19

Scott,age 68,has accumulated $850,000 in a defined contribution plan,$100,000 of which represents his own after-tax contributions.If the full amount is distributed in 2012,his early distribution penalty is:

Accepted Answer

A)  $0. 
B)  $75,000. 
C)  $85,000. 
D)  $127,500. 
E)  None of the above. 
A)  $0. 
B)  $75,000. 
C)  $85,000. 
D)  $127,500. 
E)  None of the above.

Question 20

Under what circumstances is it advantageous for an employee to elect to be taxed immediately as ordinary income on the FMV in excess of the amount paid for restricted property?

Accepted Answer

The specia

Group term life insurance is considered to be a type of deferred compensation.

What statement is false with respect to an incentive stock option (ISO)?

Traditional IRA contributions made after an individual reaches the age of 59 1/2 are treated as excess contributions and are subject to a nondeductible 6% excise penalty tax.

The $1 million limitation for deductible executive compensation does not apply to the alternative minimum tax.

Any pre-tax amount elected by an employee as a plan contribution to a § 401(k)plan that does not exceed the statutory limit is not includible in gross income in the year of deferral and is 100% vested.

What is a profit sharing plan?

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

A direct transfer of funds from a qualified retirement plan to an IRA is not subject to the withholding rules.

Dana,age 48,is the sole remaining participant of a money purchase pension plan.The plan is terminated and a $240,000 taxable distribution is made to Dana.The early distribution penalty tax,if any,for 2012 is:

What is a defined contribution plan?

Harry receives a $10,000 distribution from a CESA.On this date,his total account balance is $16,000,with $4,000 representing earnings.If his qualified higher education expenses are $8,000,the amount included in gross income is:

A NQDC plan may discriminate in favor of officers or other highly compensated employees.

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

Fred is a self-employed accountant with gross earned income of $140,000 per year (after the deduction for one-half of any self-employment tax).He has a profit sharing plan (i.e.,defined contribution plan).What is the maximum amount Fred can contribute to his retirement plan?

The minimum annual distributions must be made over the life of the participant or the life of the participant and a designated individual beneficiary.

Susan,an executive,receives a golden parachute payment of $500,000 from her employer.Her average annual compensation for the most recent five years is $100,000.Which of the following statements is correct?

Scott,age 68,has accumulated $850,000 in a defined contribution plan,$100,000 of which represents his own after-tax contributions.If the full amount is distributed in 2012,his early distribution penalty is:

Under what circumstances is it advantageous for an employee to elect to be taxed immediately as ordinary income on the FMV in excess of the amount paid for restricted property?

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

Group term life insurance is considered to be a type of deferred compensation.

What statement is false with respect to an incentive stock option (ISO)?

Traditional IRA contributions made after an individual reaches the age of 59 1/2 are treated as excess contributions and are subject to a nondeductible 6% excise penalty tax.

The $1 million limitation for deductible executive compensation does not apply to the alternative minimum tax.

Any pre-tax amount elected by an employee as a plan contribution to a § 401(k)plan that does not exceed the statutory limit is not includible in gross income in the year of deferral and is 100% vested.

What is a profit sharing plan?

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

A direct transfer of funds from a qualified retirement plan to an IRA is not subject to the withholding rules.

Dana,age 48,is the sole remaining participant of a money purchase pension plan.The plan is terminated and a $240,000 taxable distribution is made to Dana.The early distribution penalty tax,if any,for 2012 is:

What is a defined contribution plan?

Harry receives a $10,000 distribution from a CESA.On this date,his total account balance is $16,000,with $4,000 representing earnings.If his qualified higher education expenses are $8,000,the amount included in gross income is:

A NQDC plan may discriminate in favor of officers or other highly compensated employees.

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

Fred is a self-employed accountant with gross earned income of $140,000 per year (after the deduction for one-half of any self-employment tax).He has a profit sharing plan (i.e.,defined contribution plan).What is the maximum amount Fred can contribute to his retirement plan?

The minimum annual distributions must be made over the life of the participant or the life of the participant and a designated individual beneficiary.

Susan,an executive,receives a golden parachute payment of $500,000 from her employer.Her average annual compensation for the most recent five years is $100,000.Which of the following statements is correct?

Scott,age 68,has accumulated $850,000 in a defined contribution plan,$100,000 of which represents his own after-tax contributions.If the full amount is distributed in 2012,his early distribution penalty is:

Under what circumstances is it advantageous for an employee to elect to be taxed immediately as ordinary income on the FMV in excess of the amount paid for restricted property?

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