24211_ch18_final_p001-014

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

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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Less: allowance* Amount previously subject to five-year averaging \$75,000 (0) \$75,000 *Five-year averaging has been repealed, thus the computation is not necessary.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distribution allowance* Amount subject to five-year averaging \$51,000 (3,800) \$47,200 *Five-year averaging has been repealed, thus the computation is not necessary.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 (...
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