Exam 15: Choice of Business Entity - Other Considerations

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.

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?

On October 23,2013,McIntyre sells 700 shares of stock at $26 per share.McIntyre acquired the stock on June 1,2012,when he exercised his option to purchase the shares through his company's incentive stock option plan.The exercise price was $12 per share and the fair market value of the stock at the date of exercise was $16 per share.For 2013,McIntyre must report Ordinary Capital a. \- 0- \ 7,000 b. \- 0- \ 9,800 c.\ 9,800 \- 0- d.\ 2,800 \ 7,000

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 a.\ 1,600 \ 1,600 b.\ 1,600 \- 0- c. \- 0- \- 0- d. \- 0- \ 1,600

The Rector Corporation maintains a SIMPLE-IRA retirement plan for its employees.The company has notified its employees that in 2013 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 2013 is $240,000 and she contributes $2,800 to the plan.What amount must Avis contribute on Andorra's behalf?

A nonqualified stock option is a right to buy a share of stock at a fixed price within a specified time period.If the employee recognizes income when the stock option is received then the employer can take a deduction of the same amount.

On February 19,2011,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 23,2012,when the fair market value of the stock is $19.He makes a Section 83(b)election at the exercise date.On September 23,2013,the fair market value of the stock is $25 per share.How much must he report as income in 2013?

Pension plans are subject to excess contribution penalties.Which of the following are correct: I.There is an excess contribution penalty for IRAs or Roth IRAs that equal 6% of the amount in excess of $5,500 or the value of the individual's IRA whichever is less. II.A 10% excess contribution penalty applies to IRAs and Roth IRAs.

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.

Concerning individual retirement accounts (IRAs), I.A single taxpayer that is an active participant in a qualified plan and has adjusted gross income of $64,000 may contribute and deduct up to $5,500 of the annual contribution. II.A taxpayer who is not an active participant and whose spouse does not work may contribute $11,000 into two separate IRAs but can only deduct $5,500 for AGI.

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?

All of the following are requirements of a qualified pension plan except:

A U.S.formed multinational corporation I.Can avoid the payment of tax on appreciated property by transferring the appreciated property to a controlled foreign corporation and then selling the property. II.Is not subject to the transfer pricing rules that a foreign multinational must observe.

A company that maintains a SIMPLE-401(k)has the option of funding the plan by I.Contributing 2% of an employee's salary up to a maximum of $5,100. II.Match the employee's contribution up to a maximum of 3 percent of the employee's compensation with a maximum contribution of $12,000.

One of the benefits of an incentive stock option is that the employee can sell the option at any time.

Posie is an employee of Geiger Technology and earns $90,000 in 2012.The maximum amount Geiger can contribute to a profit sharing plan on behalf of Posie is

Match each statement with the correct term below. -IRA

In 2008,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 4,2012,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 2012. II.Merlin does not recognize any income but must include $6,000 as a tax preference item in computing his alternative minimum taxable income.

Isabelle and Marshall are married with salaries of $50,000 and $45,000,respectively.Adjusted gross income on their jointly filed tax return is $102,000.Both individuals are active participants in employer provided qualified pension plans.What are Isabelle and Marshall's maximum combined IRA contribution and deduction amounts? Contribution Deduction a. \- 0- \- 0- b.\ 11,000 \ 2,500 c.\ 11,000 \ 5,500 d.\ 11,000 \ 7,500 e.\ 11,000 \ 11,000

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