CHAPTER 19--DEFERRED COMPEN

Which statement is incorrect with respect to a roth

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89. Which statement is incorrect with respect to a Roth IRA? A. Ordinary income and capital gain inside the Roth are not taxed (if five-year holding period is met). B. Roth IRA allows the tax-free accumulation of wealth. C. All individual taxpayers can contribute to a Roth IRA. D. A traditional IRA can be converted into a Roth IRA. E. None of the above. 12
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90. Jacob has been an active participant in a defined benefit plan for 23 years. During his last 5 years of employment, Jacob earned $39,000, $52,000, $57,000, $96,000, and $107,000, respectively (representing his highest-income years). a. Calculate Jacob’s maximum allowable benefits from this qualified plan (assume there are fewer than 100 participants). b. Assume that Jacob’s average compensation for his three high years is $212,000. Calculate Jacob’s maximum allowable benefits. 91. Determine the maximum annual benefits payable to a participant from a defined benefit plan in the following independent situations: a. Joey, age 69, has been a participant for 16 years, and his highest average compensation for 3 years is $107,000. b. Stacey, age 66, has been a participant for 9 years (11 years of service), and her highest average compensation for 3 years is $131,000. 92. Mahendra, age 37, is an employee of a retail outlet. He defers $19,000 in a § 401(k) plan in 2010. Compute any tax ramifications. 13
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93. Yao, a self-employed lawyer, has a profit sharing plan with a contribution rate of 15% of compensation. Yao’s earned income after the deduction of one-half of self-employment tax, but before the Keogh contribution, is $260,000. Calculate Yao’s maximum contribution in 2010. 14
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94. On July 1, 2006, Blue Corporation sold 100 of its common shares (worth $15 per share) to its employee Bobby for $5 per share. The sale was subject to Bobby’s agreement to resell the shares to the corporation for $5 per share if his employment is terminated within the following four years. The shares had a value of $26 per share on July 1, 2010. He sold the shares for $30 per share on September 15, 2010. No special election under § 83(b) was made. Identify the correct answer. a. Bobby will be taxed on what amount, if any, on July 1, 2006? (1) Ordinary income of $1,500. (2) Short-term capital gain of $1,500. (3) Long-term capital gain of $1,000. (4) Tax-exempt income of $1,500. (5) None of the above. b. Bobby will be taxed on what amount, if any, on July 1, 2010? (1) Ordinary income of $2,500. (2) Long-term capital gain of $2,500. (3) Ordinary income of $2,100. (4) Long-term capital gain of $2,100. (5) None of the above. c. Bobby will be taxed on what amount, if any, on September 15, 2010? (1) Long-term capital gain of $2,000. (2) Short-term capital gain of $2,000. (3) Long-term capital gain of $400. (4) Short-term capital gain of $400. (5) None of the above. d. Blue Corporation will obtain what deduction, if any? (1) Ordinary deduction of $500 on September 15, 2010. (2) Ordinary deduction of $2,100 on July 1, 2010. (3) Ordinary deduction of $2,500 on September 15, 2010. (4) Ordinary deduction of $500 on July 1, 2010.
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  • Spring '12
  • honig
  • a. b. c., b. c. d., C. D. E.

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