24211_ch18_final_p001-014

In problem 18 21 if employee has a 48000 basis in the

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: mployee has a $48,000 basis in the stock--the $28,000 income recognized upon exercise plus the $20,000 option price paid for the stock. [See Reg. 1.61-2(d)(2)(I).] No income is recognized in 2012. [See Example 30, p. 18-35, and 421(a)(1).] a. b. No income is recognized on exercise. [See Example 30, p. 18-35, and 421(a)(1).] $19,500 (6,000) $13,500 18-23 18-24 Selling price Basis in shares ($120 cost 50 shares) Capital gain recognized 11- (See Example 30 and p. 18-35.) 18-25 Selling price Basis Gain ($4,500 is ordinary) $4,500 is bargain element upon exercise [See Example 31, p. 18-38, and 421(b).] Selling price Basis Ordinary income (See Example 31 and p. 18-35.) $12,500 (6,000) $ 6,500 $9,500 (6,000) $3,500 18-4 Chapter 18 Employee Compensation and Retirement Plans 18-26 a. b. $75,000 [100% taxable per 402(a).] Computation per 402(e): Tax on lump-sum distribution: Total distribution Less: Minimum distribution Less: allowance* Amount previously subject to five-year averaging $75,000 (0) $75,000 *Five-year averaging has been repealed, thus the computation is not necessary. The problem simply demonstrates the amount that would have been eligible for averaging. 18-27 Total distribution Less: Minimum distribution allowance* Amount subject to five-year averaging $51,000 (3,800) $47,200 *Five-year averaging has been repealed, thus the computation is not necessary. The problem simply demonstrates the amount that would have been eligible for averaging. 18-28 18-29 $195,000 in 2011. [See Exhibit 18-3; pp. 18-16 and 18-10, and 415(b)(1).) A contribution to a qualified plan may be computed only on an employee's first $245,000 (in 2011) of compensation. Therefore, the maximum contribution to Mr. W's retirement account is $70,000. Note this contribution is limited to 100 percent of compensation or $49,000 limitation in 2011. (See Exhibit 18.3, Examples 10 and 11, pp. 18-15 through 18-17, and 401(a)(17).) Total amount distributed Less: Income tax at 31% 10% premature withdrawal penalty 15% on excess distribution Net after-tax distribution $300,000 (93,000) (30,000) (7,500)* $169,500 18-30 *15% on excess distribution of $150,000 less $15,000 (the premature withdrawal penalty on the excess distribution). [See pp. 18-8 and 18-9 and 72(t) and 4980A(a) and (...
View Full Document

Ask a homework question - tutors are online