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.
A)$0.
B)$56,000.
C)$110,000.
D)$280,000.
E)Some other amount.

Question

Quizplus · Accepted Answer

To calculate the nondeductible excise tax, we need to use the following formula:

Nondeductible Excise Tax = (Cash Payment - Average Annual Compensation) x 20%

Plugging in the numbers given:

Nondeductible Excise Tax = ($390,000 - $110,000) x 20%
Nondeductible Excise Tax = $280,000 x 20%
Nondeductible Excise Tax = $56,000

Therefore, Saysha would have to pay a nondeductible excise tax of $56,000.

Saysha Is an Officer of a Local Bank That Merges