Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

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 3

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.

Accepted Answer

A) True 
 B)False

Question 4

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 5

Which of the following statements regarding fringe benefits is false?

Accepted Answer

A)  The general rule is that an employee fringe benefit is taxable unless the benefit is specifically excluded from the employee's gross income. 
B)  Employers are not allowed to deduct the cost of nontaxable employee fringe benefits. 
C)  Nontaxable fringe benefits must be provided to employees on a nondiscriminatory basis. 
D)  None of the above is false. 
A)  The general rule is that an employee fringe benefit is taxable unless the benefit is specifically excluded from the employee's gross income. 
B)  Employers are not allowed to deduct the cost of nontaxable employee fringe benefits. 
C)  Nontaxable fringe benefits must be provided to employees on a nondiscriminatory basis. 
D)  None of the above is false.

Question 6

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

Question 7

Which of the following statements regarding Keogh plans is false?

Accepted Answer

A)  Keogh plans provide a tax-deferred retirement savings option for self-employed individuals. 
B)  Keogh plans must be administered by an independent trustee. 
C)  Keogh plans can be either defined-benefit or defined-contribution plans. 
D)  A self-employed person with a Keogh plan is not required to provide retirement benefits to his or her employees through the plan. 
A)  Keogh plans provide a tax-deferred retirement savings option for self-employed individuals. 
B)  Keogh plans must be administered by an independent trustee. 
C)  Keogh plans can be either defined-benefit or defined-contribution plans. 
D)  A self-employed person with a Keogh plan is not required to provide retirement benefits to his or her employees through the plan.

Question 8

In 2012, Amanda earned $70,000 self-employment income. She was allowed a $4,945 above-the line deduction for her SE tax. Compute Amanda's maximum contribution to her profit-sharing Keogh plan.

Accepted Answer

A)  $13,011 
B)  $12,022 
C)  $65,055 
D)  $50,000 
A)  $13,011 
B)  $12,022 
C)  $65,055 
D)  $50,000

Question 9

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 10

Mrs. Connelly, a self-employed individual, maintains a defined-contribution Keogh plan. Regardless of the amount of her self-employment income, Mrs. Connelly may contribute $50,000 to the Keogh plan in 2012.

Accepted Answer

A) True 
 B)False

Question 11

Mr. and Mrs. Alexander, ages 43 and 44, each earn substantial salaries but do not participate in any type of employer-sponsored qualified retirement plan. Which of the following is true?

Accepted Answer

A)  The couple can each contribute $5,000 to a traditional IRA and take a $10,000 itemized deduction on their joint Form 1040. 
B)  The couple can each contribute $5,000 to a traditional IRA and take a $10,000 above-the-line deduction on their joint Form 1040. 
C)  The couple can each contribute $2,500 to a traditional IRA and take a $5,000 above-the-line deduction on their joint Form 1040. 
D)  The couple can each contribute $2,500 to a traditional IRA and take a $5,000 itemized deduction on their joint Form 1040. 
A)  The couple can each contribute $5,000 to a traditional IRA and take a $10,000 itemized deduction on their joint Form 1040. 
B)  The couple can each contribute $5,000 to a traditional IRA and take a $10,000 above-the-line deduction on their joint Form 1040. 
C)  The couple can each contribute $2,500 to a traditional IRA and take a $5,000 above-the-line deduction on their joint Form 1040. 
D)  The couple can each contribute $2,500 to a traditional IRA and take a $5,000 itemized deduction on their joint Form 1040.

Question 12

Largo Inc., a calendar year corporation, accrued a $45,000 year-end bonus payable to its CEO in 2012. Largo and the CEO are not related parties. Largo paid the bonus to the CEO on April 3, 2013. Dargo can deduct the bonus in 2012.

Accepted Answer

A) True 
 B)False

Question 13

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 14

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 15

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 16

Four years ago, Acnex Inc. granted Ms. Cardena an incentive stock option (ISO) 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?

Accepted Answer

A)  Ms. Cardena recognizes $31,000 ordinary income, and Acnex is allowed a $31,000 deduction this year. 
B)  Ms. Cardena recognizes $31,000 ordinary income, but Acnex is allowed no deduction this year. 
C)  Ms. Cardena recognizes no ordinary income, and Acnex is allowed no deduction this year. 
D)  Ms. Cardena recognizes no ordinary income, but Acnex is allowed a $31,000 deduction this year. 
A)  Ms. Cardena recognizes $31,000 ordinary income, and Acnex is allowed a $31,000 deduction this year. 
B)  Ms. Cardena recognizes $31,000 ordinary income, but Acnex is allowed no deduction this year. 
C)  Ms. Cardena recognizes no ordinary income, and Acnex is allowed no deduction this year. 
D)  Ms. Cardena recognizes no ordinary income, but Acnex is allowed a $31,000 deduction this year.

Question 17

Mr. and Mrs. Lawry, both age 60, each make the maximum contribution to their traditional IRA. 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.

Accepted Answer

A)  $144,900 
B)  $139,900 
C)  $138,900 
D)  $132,900 
A)  $144,900 
B)  $139,900 
C)  $138,900 
D)  $132,900

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

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 20

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

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

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

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 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 regarding fringe benefits is false?

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.

Which of the following statements regarding Keogh plans is false?

In 2012, Amanda earned $70,000 self-employment income. She was allowed a $4,945 above-the line deduction for her SE tax. Compute Amanda's maximum contribution to her profit-sharing Keogh plan.

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?

Mrs. Connelly, a self-employed individual, maintains a defined-contribution Keogh plan. Regardless of the amount of her self-employment income, Mrs. Connelly may contribute $50,000 to the Keogh plan in 2012.

Mr. and Mrs. Alexander, ages 43 and 44, each earn substantial salaries but do not participate in any type of employer-sponsored qualified retirement plan. Which of the following is true?

Largo Inc., a calendar year corporation, accrued a $45,000 year-end bonus payable to its CEO in 2012. Largo and the CEO are not related parties. Largo paid the bonus to the CEO on April 3, 2013. Dargo can deduct the bonus in 2012.

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

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?

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

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.

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

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

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

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 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 regarding fringe benefits is false?

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.

Which of the following statements regarding Keogh plans is false?

In 2012, Amanda earned $70,000 self-employment income. She was allowed a $4,945 above-the line deduction for her SE tax. Compute Amanda's maximum contribution to her profit-sharing Keogh plan.

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?

Mrs. Connelly, a self-employed individual, maintains a defined-contribution Keogh plan. Regardless of the amount of her self-employment income, Mrs. Connelly may contribute $50,000 to the Keogh plan in 2012.

Mr. and Mrs. Alexander, ages 43 and 44, each earn substantial salaries but do not participate in any type of employer-sponsored qualified retirement plan. Which of the following is true?

Largo Inc., a calendar year corporation, accrued a $45,000 year-end bonus payable to its CEO in 2012. Largo and the CEO are not related parties. Largo paid the bonus to the CEO on April 3, 2013. Dargo can deduct the bonus in 2012.

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

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?

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

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.

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