The ira is a trust that is established to pay the

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Unformatted text preview: The IRA is a trust that is established to pay the higher education costs of the beneficiary. Withdrawals from an education IRA are only excludable to the extent that they are used for the education expenses. (See pp. 18-29 and 18-30.) No contribution can be made by anyone to an education IRA during any year in which contributions are made to a qualified prepaid tuition program for the same beneficiary. In any year in which an exclusion is claimed by a beneficiary for a distribution from an education IRA, no Hope credit or Lifetime Learning credit may be claimed with respect to education expenses. (See p. 18-29.) 18-10 18-11 18-12 18-13 18-14 18-15 18-16 18-17 b. 18-18 a. b. Solutions to Problem Materials 18-3 PROBLEMS 18-19 a. b. c. 18-20 a. b. c. 18-21 a. b. c. 18-22 2011--No income because of the substantial risk of forfeiture 2014--$10,000 [See Example 1, pp. 18-4 and 18-5, and 83(a).] 2011--$3,500, the current value of the restricted stock 2014--No income [See Example 3, pp. 18-5 and 18-6, and 83(b).] a. $10,000 in 2014 b. $3,500 in 2011 [See Example 1 and Example 2, pp. 18-4 through 18-6, and 83(h).] 2011--The $200 value of the option must be included in gross income. [See Example 3, pp. 18-5 and 18-6, and Reg. 1.83-7(b)(1).] 2013--No further income is recognized upon exercise. [See pp. 18-5 and 18-6 and Reg. 1.83-7(a).] The deduction available to Corporation Z is $200, to be taken in 2011, the year the option is granted. [See pp. 18-5 and 18-6, and 83(h).] No income is recognized on receipt because the options have no ascertainable value. (See Example 3 and pp. 18-5 and 18-6.) $28,000 ordinary income--This is the bargain element of $28 1,000 shares. (See Example 2 and pp. 18-4 and 18-5.) The deduction available to X Corporation is $28,000 (the compensation element to E), to be taken in 2011, the year the option is exercised. [See pp. 18-4 and 18-5, and 83(h).] In Problem 18-20, the employee has a $2,200 basis in the stock--the $200 basis in the option plus the $2,000 option price paid for the stock. In Problem 18-21, if e...
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This note was uploaded on 02/05/2012 for the course ACCT 110 taught by Professor Smith during the Spring '11 term at Adrian College.

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