Chap14%20HW%20Solutions

Chap14%20HW%20Solutions - 258 CCH Federal Taxation-Basic...

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258 CCH Federal Taxation—Basic Principles If the economic benefit doctrine is also avoided, with a tool such as substantial risk of forfeiture, the bonus could be deferred until the risk of forfeiture disappears or the dates of receipt of the bonus, whichever is earlier. In most instances, however, employees prefer to have some assurances that they will ultimately receive benefits from the arrangement. If an employee is concerned about either of the above arrange- ments, then the Rabbi trust may be appropriate to secure a nonqualified deferred compensation arrangement. ANSWERS TO QUESTIONS—CHAPTER 14 Topical List of Questions 1. Pension and Profit-Sharing Plans: Tax Advantages (¶14,001) 2. Defined Contribution Plan v. Defined Benefit Plan (¶14,101 and ¶14,110) 3. Death Benefits v. Vested Benefits (¶14,265) 4. Top-Heavy Plans (¶14,165) 5. Section 401(k) Plans (¶14,135) 6. Keogh Plan Contributions (¶14,170) 7. IRA Contributions (¶14,401) 8. Credit for IRA Contributions (¶14,401) 9. Annuities: Exclusion Ratio (¶14,325) 10. Rollovers (¶14,325) 11. Loans on Retirement Accounts (¶14,325) 12. Individual Retirement Accounts (IRAs) (¶14,401) 13. Roth IRA (¶14,415) 14. Coverdell Education Savings Account (¶14,601) 15. Roth IRA (¶14,415) 16. IRA Withdrawals (¶14,401) 17. Nonqualified Deferred Compensation Plans (¶14,501) 18. Savings Incentive Match Plans for Employees (¶14,140) 19. Savings Incentive Match Plans for Employees (¶14,140) 20. Savings Incentive Match Plans for Employees (¶14,140) Answers to Questions Pension and Profit-Sharing Plans: Tax Advantages 1. a. The contributions are deductible to the employer, the earnings in the pension trust accumulate tax- free, and the employee is not taxed until receipt. Chapter 14
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Instructor's Manual 259 b. The pension benefit may never vest, the employee may die prior to retirement, the amount may be speculative, and in any event, there is no current enjoyment. A salary increase is ‘‘money in the bank'' and is preferred by people with ‘‘the bird in the hand'' approach. Defined Contribution Plan v. Defined Benefit Plan 2. Defined contribution plan . Contributions are made for an employee's benefit. The amount of the benefit depends on how the contributions are invested. Defined benefit plan . Employees are promised a specified retirement benefit. The employer makes contributions based on actuarial facts and assumptions. Death Benefits v. Vested Benefits 3. A ‘‘vested'' benefit need not include a death benefit, only a pension to the employee. Under the Retirement Equity Act of 1984, if the participant dies prior to retirement, the surviving spouse is entitled to a survivor annuity, unless waived. Top-Heavy Plans
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This homework help was uploaded on 04/09/2008 for the course ACCT Acct 308 taught by Professor Lau during the Summer '06 term at CSU Fullerton.

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Chap14%20HW%20Solutions - 258 CCH Federal Taxation-Basic...

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