Question 1

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

Accepted Answer

The spread on an ISO is a positive adjustment for AMT purposes.

Question 2

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 phase­out provision.

Accepted Answer

An individual is not considered an active participant in a qualified plan merely because the individual's spouse is an active participant in such a plan for any part of a plan year.Thus,most homemakers still can take a full $5,500 deduction in 2014 for an IRA contribution regardless of the participation status of the spouse.However,if the couple's AGI is above $181,000,the phase-out of the deduction begins at $181,000 and ends at $191,000 (phase-out over a $10,000 range).

Question 3

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

Accepted Answer

For deductible contributions,the adjusted basis is zero.For nondeductible contributions,the basis for a traditional IRA is equal to the amount of the contributions.

Question 4

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. However, a distribution from a qualified plan that is not a direct transfer to an IRA may be subject to withholding rules.

Question 5

If a married taxpayer is an active participant in another qualified retirement plan,the traditional IRA deduction phaseout begins at $96,000 of AGI for a joint return in 2014.

Accepted Answer

This is correct according to the IRS rules for the 2014 tax year. If a taxpayer is an active participant in another qualified retirement plan (such as a 401(k) plan), the traditional IRA deduction phaseout begins at $96,000 for joint filers.

Question 6

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. After reaching age 59 1/2, a Roth IRA account holder can make qualified withdrawals tax-free if the account has been open for at least five years.

Question 7

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

Such treatment is applicable if contributions are made after the individual reaches age 70 1/2.

Question 8

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

Accepted Answer

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

Question 9

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

Accepted Answer

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

Question 10

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

Both employees and independent contractors are covered by the golden parachute provision.

Question 11

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...

Question 12

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

Nondeductible contributions up to the statutory limit of $5,500 in 2014 (assuming not eligible for catch up provision)can be made.

Question 13

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

No withholding is required for direct transfers from one qualified retirement plan to another qualified retirement plan.

Question 14

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

The normal statutory limits apply to the Roth IRA as well as to a traditional IRA.

Question 15

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 a joint tax return must be filed to qualify.

Question 16

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

Accepted Answer

Discrimination is possible for a NQDC plan.

Question 17

Low- and middle-income taxpayers may make nondeductible contributions up to $4,000 per child per year to a Coverdell Education Savings Account (CESA).

Accepted Answer

The ceiling amount is $2,000 per child in 2014.

Question 18

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 2014.

Accepted Answer

The $5,500 maximum contribution in 2014 to a Roth IRA is not deductible.Contributions to a Roth IRA are never deductible.

Question 19

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 nonqualified stock options, they receive ordinary income equal to the difference between the exercise price and the fair market value of the stock. At the same time, the employer is allowed to deduct this same amount as a business expense, resulting in a tax benefit for the employer.

Question 20

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

Accepted Answer

Withdrawals from a Roth IRA that are subject to taxation are treated as from contributions (i.e. ,tax-free return of capital)first and from earnings last.

Quiz 19: Deferred Compensation

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

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 phaseout provision.

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

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

If a married taxpayer is an active participant in another qualified retirement plan,the traditional IRA deduction phaseout begins at $96,000 of AGI for a joint return in 2014.

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.

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.

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

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

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.

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

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.

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.

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.

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

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

Low- and middle-income taxpayers may make nondeductible contributions up to $4,000 per child per year to a Coverdell Education Savings Account (CESA).

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 2014.

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.

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

Quiz 19: Deferred Compensation

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

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 phase­out provision.

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

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

If a married taxpayer is an active participant in another qualified retirement plan,the traditional IRA deduction phaseout begins at $96,000 of AGI for a joint return in 2014.

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.

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.

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

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

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.

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

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.

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.

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.

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

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

Low- and middle-income taxpayers may make nondeductible contributions up to $4,000 per child per year to a Coverdell Education Savings Account (CESA).

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 2014.

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.

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

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 phaseout provision.