Question 1

A participant has an adjusted basis of $0 in any nondeductible contributions to a traditional IRA.

Accepted Answer

The answer of A participant has an adjusted basis of...

Question 2

In a direct transfer from one qualified retirement plan to another qualified retirement plan,the employer does not have to withhold 20% of the amount of the direct transfer.

Accepted Answer

When a direct transfer from one qualified retirement plan to another qualified retirement plan is made, the employer does not have to withhold 20% of the amount of the direct transfer. This is because the money is going directly from one retirement account to another, without passing through the hands of the account owner, so there is no need for the employer to withhold any taxes.

Question 3

On February 1,2016,Tuan withdrew $15,000 from his IRA #1.He deposited the funds back into IRA #1 within 60 days (a"rollover").Tuan may do one more nontaxable rollover distribution from either IRA #1 or IRA #2 starting in April 2016.

Accepted Answer

According to IRS rules, only one rollover is allowed per 12-month period across all IRAs, not per account. Since Tuan already did a rollover in February 2016, he cannot do another until February 2017.

Question 4

A company is denied a deduction for a golden parachute payment to an employee,but not for a golden parachute payment to an independent contractor.

Accepted Answer

Golden parachute payments, which are substantial payments made to executives upon a change in a company's control, are subject to the same tax implications regardless of whether the recipient is an employee or an independent contractor. The tax code does not differentiate based on the recipient's employment status but rather on the nature and terms of the payment.

Question 5

A NQDC plan cannot discriminate in favor of officers or other highly compensated employees.

Accepted Answer

The answer of A NQDC plan cannot discriminate in favor...

Question 6

Distributions from a Roth IRA that are subject to taxation are treated first as from earnings and last as from contributions.

Accepted Answer

Distributions from a Roth IRA are generally tax-free because contributions are made with after-tax dollars. Therefore, distributions are not subject to taxation, regardless of whether they come from contributions or earnings.

Question 7

A direct transfer of funds from a qualified retirement plan to an IRA is subject to the withholding rules.

Accepted Answer

A direct transfer of funds from a qualified retirement plan to an IRA is not subject to the withholding rules. The funds are transferred directly from the retirement plan to the IRA custodian without any withholding. However, if the individual receives a distribution from the retirement plan and then rolls it over to an IRA within 60 days, the distribution may be subject to mandatory withholding.

Question 8

An individual,age 40,who is not subject to the phase-out provision may contribute a nondeductible amount to a Roth IRA up to $5,500 per year in 2016.

Accepted Answer

The statement is true. As of 2016, individuals who are not subject to the phase-out provision may contribute up to $5,500 in after-tax dollars to a Roth IRA. However, individuals over the age of 50 are eligible for catch-up contributions of up to $1,000, making their total contribution limit $6,500.

Question 9

If a married taxpayer is an active participant in another qualified retirement plan,the traditional IRA deduction phaseout begins at $98,000 of AGI for a joint return in 2016.

Accepted Answer

According to the IRS, if a married taxpayer is an active participant in another qualified retirement plan, the traditional IRA deduction phaseout begins at $98,000 of AGI for a joint return in 2016.

Question 10

The $1 million deduction limitation on executive compensation is decreased by any nondeductible golden parachute payments made to an employee.

Accepted Answer

This statement is true. The $1 million deduction limitation on executive compensation is reduced by any nondeductible golden parachute payments made to an employee.

Question 11

The maximum annual contribution to a Roth IRA for an unmarried taxpayer who is age 35 is the smaller of $5,500 or the individual's compensation for the year.

Accepted Answer

This statement is correct according to the IRS guidelines for 2021. However, the contribution limit may vary depending on the individual's income level and tax filing status.

Question 12

An employer obtains a tax deduction at the same time and to the extent that ordinary income is recognized by the employee who receives nonqualified stock options.

Accepted Answer

When an employee exercises a nonqualified stock option and recognizes ordinary income, the employer is allowed to take a tax deduction for the same amount in the same year.

Question 13

For the spousal IRA provision to apply,a joint return must be filed.

Accepted Answer

The spousal IRA provision allows a non-working spouse to contribute to an IRA based on the working spouse's income, but to qualify, a joint tax return must be filed.

Question 14

A participant who is at least age 59 1/2 can make a tax-free qualified withdrawal from a Roth IRA after a five-year holding period.

Accepted Answer

This is true. The five-year holding period begins on the first day of the tax year for which the first contribution was made to the Roth IRA. After age 59 1/2 and the five-year holding period, qualified withdrawals are tax-free.

Question 15

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.

Accepted Answer

There are still annual contribution limits that apply to traditional IRAs, regardless of whether the contributions are deductible or nondeductible.

Question 16

Traditional IRA contributions made after an individual reaches the age of 65 are treated as excess contributions and are subject to a nondeductible 6% excise penalty tax.

Accepted Answer

Traditional IRA contributions can be made after the age of 65, but may not be tax-deductible depending on income level. There is no penalty for making contributions after age 65.

Question 17

The "spread" on an incentive stock option is subject to the alternative minimum tax.

Accepted Answer

The spread, which is the difference between the fair market value of the stock at exercise and the exercise price, is included in the alternative minimum tax calculation for incentive stock options.

Question 18

An individual is considered an active participant in an employer-sponsored retirement plan merely because an individual's spouse is an active participant for any part of a plan year in applying the IRA phase-out provision.

Accepted Answer

The answer of An individual is considered an active participant...

Question 19

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

Accepted Answer

This is true. Contributions to a Roth IRA can be made up to the due date (excluding extensions) of the taxpayer's income tax return. For example, for the tax year 2020, contributions can be made up until May 17, 2021.

Question 20

Income is taxed if a taxpayer's control over the amount earned is subject to substantial restrictions.

Accepted Answer

The answer of Income is taxed if a taxpayer's control...

Quiz 19: Deferred Compensation