Exam 15: Choice of Business Entity-Other Considerations

Jose is an employee of O'Hara Industry and earns $100,000 in 2018. The maximum amount O'Hara can contribute to a money purchase plan on behalf of Jose is

Under a Roth IRA I.Any taxpayer may contribute and deduct up to $5,500 deductible contributions per year. II.The maximum contribution is phased-out for unmarried taxpayers with adjusted gross income between $120,000 and $135,000. ​

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

Concerning individual retirement accounts (IRAs), I.A single taxpayer that is an active participant in a qualified plan and has adjusted gross income of $66,000 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.​

On May 1, 2017, Peyton is granted the right to acquire 500 shares of the Simon Corporation for $18 per share. The option qualifies under the company's incentive stock option plan. The current fair market value of the stock is $10. On September 18, 2018 when the stock is selling for $20 per share, Peyton exercises his option to purchase the stock. Peyton sells the shares on November 15, 2019, for $30 per share. Determine the tax consequences for Peyton and the Simon Corporation on the a.Date of grant b.Date of exercise c.Date of sale

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

On June 1, 2018, Sutton Corporation grants Anne an option under its nonqualified stock option plan to acquire 300 shares of the company's stock for $12 per share. The fair market price of the stock on the date of grant is $18. The fair market value of the option is $4. How much must Anne report as income at the date of grant?

Harriet is an employee of Castiron Inc. and earns $200,000 in 2018. The maximum amount Castiron can contribute to a money purchase plan on behalf of Harriet 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?

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. ​

The AMT applies to I.Individual taxpayers II.Corporate taxpayers ​

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

On May 5, 2016, Elton Corporation granted Germaine an option to acquire 100 shares of the company's stock for $8 per share. The fair market price of the stock on the date of grant was $14. The stock requires that Germaine remain with the company for one year after the date of exercise. The option did not have a readily ascertainable fair market value. Germaine exercises the option on June 12, 2017, when the fair market value of the stock is $18. On June 12, 2018, the fair market value of the stock is $21 per share. How much must he report as income in 2017 and 2018? ​ 2017 2018

On October 2, 2018, Miriam sells 1,000 shares of stock at $20 per share. Miriam acquired the stock on November 12, 2017, when she exercised her option to purchase the shares through her company's incentive stock option plan. The exercise price was $11 per share and the fair market value of the stock at the date of exercise was $14 per share. For 2018, Miriam must report ? Ordinary Capital Income Gain A) \ 3,000 \ 6,000 B) \ 6,000 \ 3,000 C) \ 9,000 \- 0- D) \- 0- \ 9,000 Income Gain

The employee's contribution to a nonqualified pension plan cannot be deferred, and the employer is not allowed a tax deduction for the contribution even though the employee includes the contribution in their income.

A Keogh plan is administratively more convenient and economical than a simplified employee pension plan (SEP).

On September 15, 2018, 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?

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. ​

Gilberto is a Spanish citizen living in Canada working as a computer programmer for Excel Designs, Inc., a U.S. company. I.Gilberto is a nonresident alien for U.S. tax purposes. II.If Gilberto earns $10,000 for a consulting job in Detroit, this income will be subject to U.S. tax. ​

On March 11, 2016, Carlson Corporation granted Lana an option to acquire 200 shares of the company's stock for $6 per share. The fair market price of the stock on the date of grant was $10. The stock requires that Lana remain with the company for one year after the date of exercise. The option did not have a readily ascertainable fair market value. Lana exercises the option on June 12, 2017, when the fair market value of the stock is $15. On June 12, 2018, the fair market value of the stock is $20 per share. How much must she report as income in 2018?