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Exam 19: Deferred Compensation

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Question 1

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Roxy,Inc.,grants 1,000 NQSO to an employee,Carol,entitling her to purchase Roxy stock at $10 per share (the current price of the stock).Roxy simultaneously grants 1,000 ISOs to another employee,Donna,entitling her to buy 1,000 shares of Roxy at $10 per share over a two-year period.One year later,2012,the stock has risen to $20 per share,and Carol and Donna both exercise their options in full,receiving stock not subject to an SRF.

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Question 2

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A direct transfer of funds from a qualified retirement plan to an IRA is not subject to the withholding rules.

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Question 3

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Donna,age 27 and unmarried,is an active participant in a qualified retirement plan.Her AGI is $116,000.What amount,if any,may Donna contribute to a Roth IRA in 2012?

A participant,who is age 38,in a cash or deferred arrangement plan [§ 401(k) ] may contribute up to what amount in 2012?

The maximum annual contribution to a Roth IRA for an unmarried taxpayer who is age 35 is the smaller of $5,000 or the individual's compensation for the year.

A defined benefit plan must reduce the $200,000 (in 2012)maximum benefits payable by one-tenth for each year of participation under 10 years that an employee has performed.

If an individual is ineligible to make a deductible contribution to a traditional IRA,nondeductible contributions of any amount can be made to a traditional IRA.

If a married taxpayer is an active participant in another qualified retirement plan,the traditional IRA deduction phaseout begins at $92,000 of AGI for a joint return in 2012.

Saysha is an officer of a local bank that merges with a national bank,resulting in a change of ownership.She loses her job as a result of the merger,but she receives a cash settlement of $390,000 from her employer under her golden parachute.Her average annual compensation for the past five tax years is $110,000.What amount,if any,is deductible by the bank?

Contributions to a Roth IRA can be made up to the due date (excluding extensions)of the taxpayer's income tax return.

If the special election under § 83(b) is made as a result of a restricted property transaction,which statement is false?

Any pre-tax amount elected by an employee as a plan contribution to a § 401(k)plan that does not exceed the statutory limit is not includible in gross income in the year of deferral and is 100% vested.

Nick negotiates a $4.5 million contract per year with a major college football program to become its head coach.What amount is deductible by the program in 2012 his first full year of employment.

An incentive stock option (ISO)plan is considered to be a deferred compensation arrangement.

If a person has funds from sources other than retirement assets when he or she retires,which retirement asset should be spent first?

Ebony,Inc.,uses the three-to-seven year graded vesting approach for its retirement plan.Pete has five years of service completed as of February 5,2012,his employment anniversary date.Determine Pete's nonforfeitable percentage.

Dana,age 48,is the sole remaining participant of a money purchase pension plan.The plan is terminated and a $240,000 taxable distribution is made to Dana.The early distribution penalty tax,if any,for 2012 is:

Stream,Inc.,uses a two- to six-year graded vesting approach in its defined contribution plan.If Sloane has 3 years of service,what is her nonforfeitable percentage?

An individual,age 40,who is not subject to the phase-out provision may contribute a deductible amount to a Roth IRA up to $5,000 per year in 2012.

Saysha is an officer of a local bank that merges with a national bank,resulting in a change of ownership.She loses her job as a result of the merger,but she receives a cash settlement of $390,000 from her employer under her golden parachute.Her average annual compensation for the past five tax years is $110,000.Calculate any nondeductible excise tax Saysha must pay,if any.