Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

Unreimbursed moving expenses are a miscellaneous itemized deduction.

Accepted Answer

A) True 
 B)False

Question 3

This year,Mr.Cox elected to contribute $4,000 of his $95,000 salary to his Section 401(k)plan.Mr.Cox's employer made a $4,000 matching contribution.How much compensation is reported on Mr.Cox's Form W-2?

Accepted Answer

A) $91,000 
B) $87,000 
C) $95,000 
D) $99,000 
A) $91,000 
B) $87,000 
C) $95,000 
D) $99,000

Question 4

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 5

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.

Accepted Answer

A) True 
 B)False

Question 6

The value of a nontaxable fringe benefit is different for each employee because employees have different financial needs and consumption preferences.

Accepted Answer

A) True 
 B)False

Question 7

Lawrence is a U.S.citizen who has worked in his employer's Paris office for the past five years.Compute Lawrence's 2017 AGI if his only item of income was his $130,000 salary.

Accepted Answer

A) $130,000 
B) $102,100 
C) $27,900 
D) $0 
A) $130,000 
B) $102,100 
C) $27,900 
D) $0

Question 8

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.

Accepted Answer

a.$0 contribution.b.

Question 9

Which of the following statements concerning the client-independent contractor relationship is false?

Accepted Answer

A) A client may only accept or reject the final results of the work of an independent contractor. 
B) An independent contractor is entitled to all the fringe benefits offered to the client's employees. 
C) At the end of each tax year,a client issues a Form 1099 to an independent contractor reporting the compensation paid during the year. 
D) An independent contractor must pay self-employment taxes if self-employment income is greater than $400. 
A) A client may only accept or reject the final results of the work of an independent contractor. 
B) An independent contractor is entitled to all the fringe benefits offered to the client's employees. 
C) At the end of each tax year,a client issues a Form 1099 to an independent contractor reporting the compensation paid during the year. 
D) An independent contractor must pay self-employment taxes if self-employment income is greater than $400.

Question 10

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 11

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.

Accepted Answer

A) True 
 B)False

Question 12

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 13

Mr.Thano,age 47,withdrew $22,000 from his employer-sponsored qualified retirement plan to pay for his daughter's wedding.Compute the tax cost of the withdrawal if Mr.Thano has a 28% marginal tax rate on ordinary income.

Accepted Answer

A) $2,200 
B) $6,160 
C) $8,360 
D) $11,000 
A) $2,200 
B) $6,160 
C) $8,360 
D) $11,000

Question 14

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?

Accepted Answer

A) If the account is a Roth IRA,none of the withdrawal is taxable. 
B) If the account is a traditional IRA to which Mrs.Soon made $32,000 nondeductible contributions,$45,100 of the withdrawal is taxable. 
C) If the account is a traditional IRA funded entirely with deductible contributions,the entire $77,100 withdrawal is taxable. 
D) None of the above is false. 
A) If the account is a Roth IRA,none of the withdrawal is taxable. 
B) If the account is a traditional IRA to which Mrs.Soon made $32,000 nondeductible contributions,$45,100 of the withdrawal is taxable. 
C) If the account is a traditional IRA funded entirely with deductible contributions,the entire $77,100 withdrawal is taxable. 
D) None of the above is false.

Question 15

Six years ago,HOPCO granted Lin Sing an incentive stock option (ISO)to purchase 1,000 shares of HOPCO stock for $55 per share.On date of grant,the market price was $50 per share.This year,Lin Sing exercised the ISO when the market price was $64 per share.How much ordinary income does she recognize because of the exercise?

Accepted Answer

A) $0 
B) $5,000 
C) $9,000 
D) $14,000 
A) $0 
B) $5,000 
C) $9,000 
D) $14,000

Question 16

A cafeteria plan allows employees to select between a variety of nontaxable fringe benefits or taxable cash compensation.

Accepted Answer

A) True 
 B)False

Question 17

This year,Haven Corporation granted a nonqualified stock option to Olivia to buy 5,000 shares of Haven stock for $20 for five years.At date of grant,Haven stock was selling on the Nasdaq for $19 per share.For financial statement purposes,Haven recorded $16,500 compensation expense for the estimated value of the option.
a.How much income must Olivia recognize as a result of the grant of the option?
b.Can Haven deduct the $16,500 compensation expense on this year's tax return?
c.Assuming a 35% tax rate,compute Haven's deferred tax asset or deferred tax liability (identify which)resulting from the $16,500 compensation expense.

Accepted Answer

a.$0.b.No.c.$16,500

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

Mr.Wang's corporate employer transferred him from its Seattle office to its San Jose office.Mr.Wang incurred $18,000 of moving expenses to relocate his household to San Jose.Which of the following statements is true?

Accepted Answer

A) If his employer paid him a $15,000 moving allowance,Mr.Wang is allowed a $3,000 above-the-line deduction. 
B) If his employer paid him a $15,000 moving allowance,Mr.Wang is allowed a $3,000 itemized deduction not subject to the 2% AGI floor. 
C) If his employer paid him a $15,000 moving allowance,Mr.Wang is allowed a $3,000 miscellaneous itemized deduction. 
D) Mr.Wang is not allowed any deduction for unreimbursed moving expenses. 
A) If his employer paid him a $15,000 moving allowance,Mr.Wang is allowed a $3,000 above-the-line deduction. 
B) If his employer paid him a $15,000 moving allowance,Mr.Wang is allowed a $3,000 itemized deduction not subject to the 2% AGI floor. 
C) If his employer paid him a $15,000 moving allowance,Mr.Wang is allowed a $3,000 miscellaneous itemized deduction. 
D) Mr.Wang is not allowed any deduction for unreimbursed moving expenses.

Question 20

In 2017,Dargo Inc.,a calendar year corporation,accrued a $75,000 year-end bonus payable to its CEO.Dargo and the CEO are not related parties.Dargo paid the bonus to the CEO on February 8,2018.Dargo can deduct the bonus in 2017.

Accepted Answer

A) True 
 B)False

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

Unreimbursed moving expenses are a miscellaneous itemized deduction.

This year,Mr.Cox elected to contribute $4,000 of his $95,000 salary to his Section 401(k)plan.Mr.Cox's employer made a $4,000 matching contribution.How much compensation is reported on Mr.Cox's Form W-2?

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.

The value of a nontaxable fringe benefit is different for each employee because employees have different financial needs and consumption preferences.

Lawrence is a U.S.citizen who has worked in his employer's Paris office for the past five years.Compute Lawrence's 2017 AGI if his only item of income was his $130,000 salary.

Which of the following statements concerning the client-independent contractor relationship is false?

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?

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.

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:

Mr.Thano,age 47,withdrew $22,000 from his employer-sponsored qualified retirement plan to pay for his daughter's wedding.Compute the tax cost of the withdrawal if Mr.Thano has a 28% marginal tax rate on ordinary income.

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?

A cafeteria plan allows employees to select between a variety of nontaxable fringe benefits or taxable cash compensation.

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

Mr.Wang's corporate employer transferred him from its Seattle office to its San Jose office.Mr.Wang incurred $18,000 of moving expenses to relocate his household to San Jose.Which of the following statements is true?

In 2017,Dargo Inc.,a calendar year corporation,accrued a $75,000 year-end bonus payable to its CEO.Dargo and the CEO are not related parties.Dargo paid the bonus to the CEO on February 8,2018.Dargo can deduct the bonus in 2017.

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, Partnerships, llcs, and S Corporations

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

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

Unreimbursed moving expenses are a miscellaneous itemized deduction.

This year,Mr.Cox elected to contribute $4,000 of his $95,000 salary to his Section 401(k)plan.Mr.Cox's employer made a $4,000 matching contribution.How much compensation is reported on Mr.Cox's Form W-2?

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.

The value of a nontaxable fringe benefit is different for each employee because employees have different financial needs and consumption preferences.

Lawrence is a U.S.citizen who has worked in his employer's Paris office for the past five years.Compute Lawrence's 2017 AGI if his only item of income was his $130,000 salary.

Which of the following statements concerning the client-independent contractor relationship is false?

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?

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.

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:

Mr.Thano,age 47,withdrew $22,000 from his employer-sponsored qualified retirement plan to pay for his daughter's wedding.Compute the tax cost of the withdrawal if Mr.Thano has a 28% marginal tax rate on ordinary income.

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?

A cafeteria plan allows employees to select between a variety of nontaxable fringe benefits or taxable cash compensation.

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

Mr.Wang's corporate employer transferred him from its Seattle office to its San Jose office.Mr.Wang incurred $18,000 of moving expenses to relocate his household to San Jose.Which of the following statements is true?

In 2017,Dargo Inc.,a calendar year corporation,accrued a $75,000 year-end bonus payable to its CEO.Dargo and the CEO are not related parties.Dargo paid the bonus to the CEO on February 8,2018.Dargo can deduct the bonus in 2017.

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, Partnerships, llcs, and S Corporations

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