Question 1

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 2

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. There is no mandatory withholding on the transfer.

Question 3

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 in order for this to be applicable, a joint tax return must be filed.

Question 4

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 for Roth IRA accounts. The five-year holding period begins on January 1 of the tax year for which the first contribution is made. After reaching age 59 1/2 and meeting the five-year requirement, withdrawals from the Roth IRA are generally tax-free.

Question 5

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

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.

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 tax-free as long as they are qualified distributions and therefore not subject to taxation. If a distribution is not qualified, it is subject to taxation and penalties. However, in this case, the distribution is treated as a proportional distribution from both earnings and contributions, not first from earnings and last from contributions.

Question 7

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 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

This statement is true. Contributions for a particular tax year can be made up until the tax filing deadline of that year, which is usually April 15th but can be extended to October 15th if the taxpayer files for an extension.

Question 9

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 is correct according to IRS rules for 2021. The maximum annual contribution to a Roth IRA for an unmarried taxpayer who is age 35 (or younger) is $5,500 or their compensation for the year, whichever is less. However, this contribution limit may be subject to additional limitations based on the individual's modified adjusted gross income (MAGI).

Question 10

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

Accepted Answer

A Non-Qualified Deferred Compensation (NQDC) plan can be designed to favor officers or highly compensated employees, as it is not subject to the same non-discrimination rules as qualified plans.

Question 11

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

Accepted Answer

The spread (i.e., the difference between the fair market value of the stock on the exercise date and the exercise price) on an incentive stock option is subject to the alternative minimum tax (AMT). This is because the AMT requires taxpayers to add back certain deductions and exclusions, which can include losses on incentive stock options. Therefore, the spread is included in the taxpayer's AMT income, and if the amount of AMT owed is greater than the regular tax owed, the taxpayer must pay the difference.

Question 12

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 13

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

Accepted Answer

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

Question 14

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 they may not be tax deductible depending on the individual's income level. There is no excise penalty tax for making contributions after age 65.

Question 15

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 16

On February 1, 2017, 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 2017.

Accepted Answer

According to IRS rules, a person can only do one nontaxable rollover distribution from an IRA once every 12 months. Since Tuan already did a rollover in February 2017, he cannot do another one until February 2018. Therefore, option B is correct.

Question 17

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 18

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

This is true. When an employee exercises nonqualified stock options, they recognize ordinary income equal to the difference between the fair market value and the exercise price of the options. The employer is then allowed to take a tax deduction for the same amount in the same year that the employee recognizes income.

Question 19

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 2017.

Accepted Answer

This statement is true. The contribution limit for a Roth IRA for individuals under age 50 in 2017 is $5,500, and there is no phase-out provision for individuals at age 40.

Question 20

If a married taxpayer is an active participant in another qualified retirement plan, the traditional IRA deduction phaseout begins at $99,000 of AGI for a joint return in 2017.

Accepted Answer

This is true according to IRS rules for the 2017 tax year. If the married taxpayer's AGI is $119,000 or more, they are not eligible for a traditional IRA deduction.

Quiz 19: Deferred Compensation

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.

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

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

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.

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.

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

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

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

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.

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

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 phase-out provision.

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

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.

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.

On February 1, 2017, 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 2017.

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

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.

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 2017.

If a married taxpayer is an active participant in another qualified retirement plan, the traditional IRA deduction phaseout begins at $99,000 of AGI for a joint return in 2017.