Exam 15: Choice of Business Entity-Other Considerations

Ross and Reba are both in their 30's and they are married. Reba earns $64,000 annually, and Ross earns $1,800 annually working part time. Their adjusted gross income is $81,500. Reba participates in an employer-sponsored retirement plan. Ross and Reba contribute the maximum amount allowable annually to their IRAs. What is their allowable deduction for this year's contributions?

Drew is a partner with Peyton LLP. Peyton maintains a money purchase Keogh plan for its partners and employees. Drew owns a 30% partnership interest in Peyton. Determine the maximum deductible contribution Drew can make to the plan in each of the following situations: a.Drew 's net self-employment income is $85,000. b.Drew's net self-employment income is $290,000.?

In 2013, Merlin received the right to acquire 1,200 shares of Noble Corporation stock through the company's incentive stock option plan at an exercise price of $17 per share. On January 4, 2018, Merlin exercises the option when the fair market value of the stock is $22 per share. Which of the following is(are) correct statements? I.Noble can deduct $6,000 as compensation expense in 2018. II.Merlin does not recognize any income but must include $6,000 as a tax preference item in computing his alternative minimum taxable income. ​

Coffin Corporation, a domestic corporation, owns 80% of TRT, a foreign corporation. Coffin's pro-rata share of TNT's post-1986 undistributed earnings is $9,000,000 of which $7,500,000 is cash or cash equivalents . Coffin's tax for the current year is:

The Rector Corporation maintains a SIMPLE-IRA retirement plan for its employees. The company has notified its employees that in 2018 it will fund the SIMPLE-IRA by matching an employee's contribution up to a maximum of 2% of the employee's salary. Avis' salary in 2018 is $240,000 and she contributes $2,800 to the plan. What amount must Avis contribute on Andorra's behalf?

A Keogh plan is a type of qualified pension for self-employed individuals. An individual or entity that establishes a Keogh plan can I.Only establish a defined contribution profit sharing pension plan. II.Have both employees and self-employed individuals as participants. ​

Roland is an employee with the Belmont Corporation. Belmont maintains a money purchase plan for all its employees. Determine the maximum deductible contribution Belmont can make to the pension plan in each of the following situations: a.Roland's salary is $100,000. b.Roland's salary is $225,000.

Under a nonqualified pension plan I.The yearly earnings on the pension plan assets are taxable income to the employee. II.An employer's contribution is taxable income to the employee at the time of the contribution. ​

Savings incentive match plan for employees (SIMPLE) were created to encourage small businesses to establish retirement plans for their employees.

For the current year, Steven's tentative alternative minimum tax is $24,360. His regular tax liability is $23,000. Steven has $24,000 in taxes withheld from his salary. I.Steven's alternative minimum tax is $1,360 II.Steven's tax liability is $23,000. III.Steven will have to pay an additional $360 in tax. IV.Steven's total tax liability is $24,360 ​

Hillside Group, a partnership, purchased a certified historic building for $60,000 that was originally placed in service in 1929. The partnership incurs $180,000 rehabilitating the building. The building serves as the partnership's headquarters. The rehabilitation is completed in November 2018. What amount can the Hillside Group claim on their partnership return as a rehabilitation tax credit?

Match each statement with the correct term below. -Defined contribution plan

Dunn Company bought a certified historic building in downtown Lafayette for $75,000. The land was not purchased; it is being leased. The building was originally placed into service in 1918. Dunn spends $100,000 to rehabilitate the building with the intent to develop a microbrewery on the site. The company retained 80% of the external and internal walls and framework. Assume the amount of the historic building rehabilitation credit Dunn can claim is $20,000. What is the basis in the building for depreciation purposes?

One of the benefits of an incentive stock option is that the employee can sell the option at any time.

Grand Corporation, a domestic corporation, owns 60% of ABT, a foreign corporation. During the current year, Grand receives a $160,000 dividend from ABT. ABT's post-1986 undistributed U.S. earnings are $1,200,000. ABT's post-1986 undistributed earnings are $1,600,000. Grand dividends received deduction for the current year is:

For the current year, Salvador's regular tax liability is $17,000, and his tentative alternative minimum tax is $19,000. Salvador has $16,250 withheld from his salary. I.Salvador has a tax due of $750. II.Salvador's alternative minimum tax is $0. III.Salvador has a tax due of $2,750. IV.Salvador's total tax liability is $19,000 ​

Match each statement with the correct term below. -IRA

A nonqualified stock option is a right to buy a share of stock at a fixed price within a specified time period. If the employee recognizes income when the stock option is received then the employer can take a deduction of the same amount.

Contributions to a Roth IRA: I.May be rolled-over from a regular IRA in a nontaxable transaction. II.May be tax deductible. III.Are not taxed when withdrawn if they have been in an established account for at least five years and the taxpayer is at least 59¹/₂ before withdrawals are made. ​

To obtain the rehabilitation expenditures tax credit certain criteria must be satisfied. Which of the following are correct statements about the credit? I.The amount spend on the rehabilitation must exceed $5,000. II.The rehabilitation work cannot remove more than 25% of the internal walls and framework. ​