Exam 15: Compensation and Retirement Planning

The value of employer-provided health insurance is excluded from the employee's gross income.

Traditional IRAs but not Roth IRAs are subject to a minimum distribution requirement after the owner reaches age 70½.

This year,Larry was awarded a bonus by his corporate employer that will be paid in five annual installments beginning in the year Larry retires.The employer's liability for the future payment is unfunded.Even though Larry earned the bonus this year,he does not recognize any current income.

An employer is allowed to deduct the accrued expense for the employer's liability to pay nonqualified deferred compensation.

Harold Biggs is provided with $200,000 coverage under his employer's group-term life insurance plan.Which of the following statements is true?

Eight years ago,Acnex Inc.granted Ms.Cardena a nonqualified option to purchase 1,000 shares of Acnex stock at $44 per share.On date of grant,the market price was $42 per share.This year,Ms.Cardena exercised the option when the market price was $75 per share.Which of the following statements is true?

Which of the following statements concerning qualified retirement plans is false?

Keogh plans allow self-employed individuals to save for retirement on a tax-deferred basis.

What is the maximum IRA contribution that Mr.Higgins can make under each of the following assumptions? a.He is age 22 and single.His only income is $14,000 of interest and dividends from a trust fund. b.He is age 30 and single.His only income is a $35,000 distributive share of ordinary business income from a partnership. c.He is age 60 and single.His only income is $44,000 wages from his job. d.He is 45 and files a joint return with his wife.His sole proprietorship generates an $8,200 loss,and his wife's salary is $50,000.

Contributions to an employer-sponsored qualified retirement plan are deductible by the employer in the year of contribution but are not included in the employees' gross income.

Which of the following statements regarding Keogh plans is false?

A Keogh plan maintained for the owner of an unincorporated business must cover all employees of the business on a nondiscriminatory basis.

Lana,an employee of Compton University,paid $1,500 for professional journal subscriptions and $1,000 membership dues to academic organizations.Her employer reimbursed her only for the $1,000 membership dues.Which of the following statements is true?

A shareholder-employee of an S corporation prefers to receive a greater salary rather than a greater pro-rata share of corporate taxable income.

Mrs.Lee,age 70,withdrew $40,000 from her traditional IRA this year.The balance in the account at year-end was $96,600,which included $28,000 of nondeductible contributions.Compute the taxable portion of the $40,000 withdrawal.

An individual who wants to roll over the balance in an employer-sponsored qualified retirement plan to an IRA should always choose a Roth IRA over a traditional IRA.

Wallace Corporation needs an additional worker on a multiyear project.It could hire an employee for a $30,000 annual salary.Alternatively,it could engage an independent contractor for a $35,000 annual fee.Which of the following is true?

Olan Inc.provides an on-site day care center free of charge to employees who have pre-school children.Employees who enroll their children may exclude the value of this fringe benefit from gross income.

Mr.Scott,age 46,quit his job with MNP Inc.and withdrew the $184,000 balance in his Section 401(k)plan.Mr.Scott immediately deposited the withdrawal in a new rollover Roth IRA with a local bank.Which of the following statements is false?

Mr.and Mrs.Williams are the sole shareholders of Lessing,Inc.,a regular corporation.Last year,Lessing employed the Williams' son and paid him a $50,000 salary.During a recent IRS audit,the revenue agent discovered that the son rarely shows up for work and spends most of his time playing golf.Which of the following statements is true?