Exam 15: Compensation and Retirement Planning

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 is not a factor considered by the courts when evaluating the reasonableness of an employee's compensation?

Mr and Mrs Williams are the sole shareholders of Lessing, Inc., an S 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?

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

New companies and those with volatile earnings and uncertain cash flows generally prefer defined-contribution plans to defined-benefit plans.

Jason, a single individual, is employed by KLD Inc. but doesn't participate in any employer-sponsored retirement plan. Jason's annual contribution to his Roth IRA is deductible.

Lawrence is a U.S. citizen who has worked in his employer's Paris office for the past five years. Compute Lawrence's 2018 AGI if his only item of income was his $130,000 salary.

The classification of a worker as an employee or an independent contractor determines how much payroll tax a company must pay.

Mr and Mrs Lawry, both age 60, each make the maximum contribution to their traditional IRAs. Mr Lawry is an active participant in a section 401(k) plan, but Mrs Lawry is not an active participant in any other qualified plan. If their joint AGI before any IRA deduction is $144,900, compute their AGI.

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

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

In 2018, Dargo Inc., a calendar year corporation, accrued a $75,000 year-end bonus payable to its communications director. Dargo and the director are not related parties. Dargo paid the bonus to the director on February 8, 2019. Dargo can deduct the bonus in 2018.

Which of the following is not a benefit of nonqualified deferred compensation plans?

Qualified withdrawals from both traditional and Roth IRAs are tax-exempt.

An employee who receives restricted stock as compensation from a corporate employer must include the stock's fair market value in gross income in the year of receipt, even though the employee's ownership rights in the stock are nonvested.

Mr Paul, age 73 and single, earned a $150,000 salary (AGI) as a university professor. He no longer participates in the university's qualified retirement plan. Which of the following is true?

Which of the following statements concerning the employer-employee relationship is true?

Mrs Soon retired at age 68 and withdrew the entire $77,100 balance from an IRA to buy a sailboat. She opened this account in 1999. Which of the following statements is false?

Julie, a single individual, is employed by Dashell Inc. but doesn't participate in any employer-sponsored retirement plan. Julie's annual contribution to her traditional IRA is deductible.

Mr Smith, age 61, withdrew $12,000 from his traditional IRA this year. The balance in the account at year-end was $183,700, which included $40,000 of nondeductible contributions. Compute the taxable portion of the $12,000 withdrawal.