Question 1

Which of the following statements regarding the foreign earned income exclusion is false?

Accepted Answer

A)  Expatriates may not claim a foreign tax credit for foreign tax paid on excluded income. 
B)  The exclusion is limited to an inflation-adjusted annual dollar amount. 
C)  The exclusion is available to any U.S. citizen employed by a foreign company. 
D)  The exclusion is available to any U.S. citizen working and residing in a foreign country. 
A)  Expatriates may not claim a foreign tax credit for foreign tax paid on excluded income. 
B)  The exclusion is limited to an inflation-adjusted annual dollar amount. 
C)  The exclusion is available to any U.S. citizen employed by a foreign company. 
D)  The exclusion is available to any U.S. citizen working and residing in a foreign country.

Question 2

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

Accepted Answer

A)  Employer contributions to the plan are not included in the employees' gross income. 
B)  The plan is tax-exempt so that earnings can accumulate on a before-tax basis. 
C)  Employer contributions are deductible in the year of payment. 
D)  None of the above is false. 
A)  Employer contributions to the plan are not included in the employees' gross income. 
B)  The plan is tax-exempt so that earnings can accumulate on a before-tax basis. 
C)  Employer contributions are deductible in the year of payment. 
D)  None of the above is false.

Question 3

This year, Nilo Inc. granted nonqualified stock options to 230 employees. For financial statement purposes, Nilo recorded a $179,200 expense for the estimated value of the options. As a result of this transaction, Nilo has a:

Accepted Answer

A)  Temporary favorable book/tax difference 
B)  Temporary unfavorable book/tax difference 
C)  Permanent favorable book/tax difference 
D)  Permanent unfavorable book/tax difference 
A)  Temporary favorable book/tax difference 
B)  Temporary unfavorable book/tax difference 
C)  Permanent favorable book/tax difference 
D)  Permanent unfavorable book/tax difference

Question 4

The 10% penalty imposed on premature withdrawals from qualified retirement plans is intended to discourage participants from withdrawing funds before retirement.

Accepted Answer

A) True 
 B)False

Question 5

Jorland is a 30-year-old single taxpayer. Her $3,760 AGI is the total of $7,940 interest and dividend income from a trust fund, $4,190 income from a rent property, and an $8,370 loss from a new business that she started this year. Compute Ms. Jorland's maximum IRA contribution.

Accepted Answer

A)  $0 
B)  $3,760 
C)  $4,190 
D)  $5,500 
A)  $0 
B)  $3,760 
C)  $4,190 
D)  $5,500

Question 6

An employee receives $110,000 of group term life insurance coverage per year. The cost of this coverage to his employer is $90. The cost based on the IRS's uniform premium table is $1.08 per year per $1,000 of coverage. What amount is taxable to the employee?

Accepted Answer

A)  $64.80 
B)  $54.00 
C)  $90.00 
D)  $118.80 
A)  $64.80 
B)  $54.00 
C)  $90.00 
D)  $118.80

Question 7

Which of the following statements comparing traditional and Roth IRAs is false?

Accepted Answer

A)  For a 57-year old individual, the maximum allowable contribution to either type of IRA is $6,500. 
B)  Contributions to traditional IRAs may be deductible; contributions to Roth IRAs are nondeductible. 
C)  Individuals who have reached age 70½ must begin liquidating either type of IRA. 
D)  Individuals may have to pay a premature withdrawal penalty from either type of IRA. 
A)  For a 57-year old individual, the maximum allowable contribution to either type of IRA is $6,500. 
B)  Contributions to traditional IRAs may be deductible; contributions to Roth IRAs are nondeductible. 
C)  Individuals who have reached age 70½ must begin liquidating either type of IRA. 
D)  Individuals may have to pay a premature withdrawal penalty from either type of IRA.

Question 8

Knox, age 34 and single, has $127,800 AGI, $108,200 of which is compensation income. Compute her maximum contribution to her Roth IRA.

Accepted Answer

A)  $0 
B)  $2,640 
C)  $2,860 
D)  $5,500 
A)  $0 
B)  $2,640 
C)  $2,860 
D)  $5,500

Question 9

Which of the following statements regarding the tax consequences of wages is false?

Accepted Answer

A)  Cash basis employees must report wages in the year payment is actually or constructively received. 
B)  Employees may elect whether or not their employer withholds income and payroll taxes from their wages. 
C)  Whether wages are currently deductible by the employer depends on the type of services rendered by the employee. 
D)  Wages paid to business employees are either deductible by the employer or treated as a capitalized cost. 
A)  Cash basis employees must report wages in the year payment is actually or constructively received. 
B)  Employees may elect whether or not their employer withholds income and payroll taxes from their wages. 
C)  Whether wages are currently deductible by the employer depends on the type of services rendered by the employee. 
D)  Wages paid to business employees are either deductible by the employer or treated as a capitalized cost.

Question 10

Peter is a 20-year-old college student. His AGI consists of $12,000 interest and dividend income from a trust fund and $4,180 of wages from a part-time job. Compute Peter's maximum IRA contribution:

Accepted Answer

A)  $0 
B)  $3,000 
C)  $4,180 
D)  $5,500 
A)  $0 
B)  $3,000 
C)  $4,180 
D)  $5,500

Question 11

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?

Accepted Answer

A)  The IRS can treat the $50,000 payment as a constructive dividend to the son. 
B)  The IRS can treat the $50,000 payment as a constructive dividend to Mr. and Mrs Williams. 
C)  The IRS can disallow Lessing's $50,000 deduction for the son's salary. 
D)  The IRS can treat the $50,000 payment as a constructive dividend to Mr. and Mrs Williams and can disallow Lessing's $50,000 deduction for the son's salary. 
A)  The IRS can treat the $50,000 payment as a constructive dividend to the son. 
B)  The IRS can treat the $50,000 payment as a constructive dividend to Mr. and Mrs Williams. 
C)  The IRS can disallow Lessing's $50,000 deduction for the son's salary. 
D)  The IRS can treat the $50,000 payment as a constructive dividend to Mr. and Mrs Williams and can disallow Lessing's $50,000 deduction for the son's salary.

Question 12

An employee recognizes taxable income if his employer provides group-term life insurance coverage in excess of $50,000.

Accepted Answer

A) True 
 B)False

Question 13

Employees who save for retirement through an employer-sponsored qualified plan never include the earnings on their savings in gross income.

Accepted Answer

A) True 
 B)False

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

Employees don't include the value of any compensatory fringe benefits in gross income because the benefit doesn't consist of a direct cash payment.

Accepted Answer

A) True 
 B)False

Question 16

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?

Accepted Answer

A)  Mr. Scott must include the $184,000 withdrawal in gross income. 
B)  Mr. Scott must pay a 10% premature withdrawal penalty. 
C)  Future withdrawals from the rollover Roth IRA will be nontaxable. 
D)  None of the statements is false. 
A)  Mr. Scott must include the $184,000 withdrawal in gross income. 
B)  Mr. Scott must pay a 10% premature withdrawal penalty. 
C)  Future withdrawals from the rollover Roth IRA will be nontaxable. 
D)  None of the statements is false.

Question 17

Mrs Lee, age 70, withdrew $10,000 from her Roth IRA this year. Mrs Lee opened this account in 2000. The balance in the account at year-end was $76,600, which included $50,000 of contributions. Compute the taxable portion of the $10,000 withdrawal.

Accepted Answer

A)  $0 
B)  $4,226 
C)  $5,774 
D)  $10,000 
A)  $0 
B)  $4,226 
C)  $5,774 
D)  $10,000

Question 18

Six years ago, HOPCO granted Ms. Cardena a nonqualified option to purchase 1,000 shares of HOPCO stock at $12 per share. On date of grant, the market price was $10 per share. This year, Ms. Cardena exercised the option when the market price was $33 per share. Compute HOPCO's deduction resulting from the exercise.

Accepted Answer

A)  $0 
B)  $12,000 
C)  $23,000 
D)  None of the above. 
A)  $0 
B)  $12,000 
C)  $23,000 
D)  None of the above.

Question 19

Defined-contribution plans provide participants with a targeted retirement benefit, typically in the form of a monthly pension.

Accepted Answer

A) True 
 B)False

Question 20

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.

Accepted Answer

A)  $0 
B)  $8,199 
C)  $31,801 
D)  $40,000 
A)  $0 
B)  $8,199 
C)  $31,801 
D)  $40,000

Which of the following statements regarding the foreign earned income exclusion is false?

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

This year, Nilo Inc. granted nonqualified stock options to 230 employees. For financial statement purposes, Nilo recorded a $179,200 expense for the estimated value of the options. As a result of this transaction, Nilo has a:

The 10% penalty imposed on premature withdrawals from qualified retirement plans is intended to discourage participants from withdrawing funds before retirement.

Jorland is a 30-year-old single taxpayer. Her $3,760 AGI is the total of $7,940 interest and dividend income from a trust fund, $4,190 income from a rent property, and an $8,370 loss from a new business that she started this year. Compute Ms. Jorland's maximum IRA contribution.

An employee receives $110,000 of group term life insurance coverage per year. The cost of this coverage to his employer is $90. The cost based on the IRS's uniform premium table is $1.08 per year per $1,000 of coverage. What amount is taxable to the employee?

Which of the following statements comparing traditional and Roth IRAs is false?

Knox, age 34 and single, has $127,800 AGI, $108,200 of which is compensation income. Compute her maximum contribution to her Roth IRA.

Which of the following statements regarding the tax consequences of wages is false?

Peter is a 20-year-old college student. His AGI consists of $12,000 interest and dividend income from a trust fund and $4,180 of wages from a part-time job. Compute Peter's maximum IRA contribution:

An employee recognizes taxable income if his employer provides group-term life insurance coverage in excess of $50,000.

Employees who save for retirement through an employer-sponsored qualified plan never include the earnings on their savings in gross income.

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

Employees don't include the value of any compensatory fringe benefits in gross income because the benefit doesn't consist of a direct cash payment.

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?

Mrs Lee, age 70, withdrew $10,000 from her Roth IRA this year. Mrs Lee opened this account in 2000. The balance in the account at year-end was $76,600, which included $50,000 of contributions. Compute the taxable portion of the $10,000 withdrawal.

Defined-contribution plans provide participants with a targeted retirement benefit, typically in the form of a monthly pension.

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.

Taxes and Taxing Jurisdictions

Policy Standards for a Good Tax

Taxes as Transaction Costs

Maxims of Income Tax Planning

Tax Research

Taxable Income from Business Operations

Property Acquisitions and Cost Recovery Deductions

Property Dispositions

Nontaxable Exchanges

Sole Proprietorships

The Corporate Taxpayer

The Choice of Business Entity

Jurisdictional Issues in Business Taxation

The Individual Tax Formula

Investment and Personal Financial Planning

Tax Consequences of Personal Activities

The Tax Compliance Process

Filters

Exam 15: Compensation and Retirement Planning

Which of the following statements regarding the foreign earned income exclusion is false?

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

This year, Nilo Inc. granted nonqualified stock options to 230 employees. For financial statement purposes, Nilo recorded a $179,200 expense for the estimated value of the options. As a result of this transaction, Nilo has a:

The 10% penalty imposed on premature withdrawals from qualified retirement plans is intended to discourage participants from withdrawing funds before retirement.

Jorland is a 30-year-old single taxpayer. Her $3,760 AGI is the total of $7,940 interest and dividend income from a trust fund, $4,190 income from a rent property, and an $8,370 loss from a new business that she started this year. Compute Ms. Jorland's maximum IRA contribution.

An employee receives $110,000 of group term life insurance coverage per year. The cost of this coverage to his employer is $90. The cost based on the IRS's uniform premium table is $1.08 per year per $1,000 of coverage. What amount is taxable to the employee?

Which of the following statements comparing traditional and Roth IRAs is false?

Knox, age 34 and single, has $127,800 AGI, $108,200 of which is compensation income. Compute her maximum contribution to her Roth IRA.

Which of the following statements regarding the tax consequences of wages is false?

Peter is a 20-year-old college student. His AGI consists of $12,000 interest and dividend income from a trust fund and $4,180 of wages from a part-time job. Compute Peter's maximum IRA contribution:

An employee recognizes taxable income if his employer provides group-term life insurance coverage in excess of $50,000.

Employees who save for retirement through an employer-sponsored qualified plan never include the earnings on their savings in gross income.

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

Employees don't include the value of any compensatory fringe benefits in gross income because the benefit doesn't consist of a direct cash payment.

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?

Mrs Lee, age 70, withdrew $10,000 from her Roth IRA this year. Mrs Lee opened this account in 2000. The balance in the account at year-end was $76,600, which included $50,000 of contributions. Compute the taxable portion of the $10,000 withdrawal.

Defined-contribution plans provide participants with a targeted retirement benefit, typically in the form of a monthly pension.

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.

Taxes and Taxing Jurisdictions

Policy Standards for a Good Tax

Taxes as Transaction Costs

Maxims of Income Tax Planning

Tax Research

Taxable Income from Business Operations

Property Acquisitions and Cost Recovery Deductions

Property Dispositions

Nontaxable Exchanges

Sole Proprietorships

The Corporate Taxpayer

The Choice of Business Entity

Jurisdictional Issues in Business Taxation

The Individual Tax Formula

Investment and Personal Financial Planning

Tax Consequences of Personal Activities

The Tax Compliance Process

Filters