quali fi ed employer sponsored plan b The annuity rules are used to determine

Quali fi ed employer sponsored plan b the annuity

This preview shows page 10 - 12 out of 12 pages.

quali fi ed employer-sponsored plan. b. The annuity rules are used to determine the excluded amount, using the aggregate account balances of 31. all IRAs for this purpose. b. The exclusion ratio has no application unless there is an “investment in the contract.” 32. a. 33. c. Forward averaging is not available. 34. a. 50% of $60,000, up to $50,000. 35. a. 36. e. 37. c. 38. d. 39. d. 40. d. 41. e. 42. c. 43. e. 44. c. 45. b. 46. d. 47. c. 48. d. 70% x 4/10 x 90 nonhighly compensated 49. d. 50. c. 51. d. 52. b. $16,500 deemed employee contribution limit plus $20,000 (20% x $100,000) deemed employer 53. contribution limit. a. 54. a. Keogh plans have cliff or graded vesting. 55. d. 56. a. The contributions are limited to $5,000, but there are no deductions permitted. 57. b. Exclude 12/(8 + 22) or 40% and include 60% x withdrawal of $6,000 58. b. 59. c. The employer can promise to pay the employee after retirement. 60. d. 61.
Image of page 10
909 Testbank © 2009 CCH. All Rights Reserved. Chapter 24 ANSWERS TO SUPPLEMENTARY PROBLEMS—CHAPTER 24 a. 70 percent of nonhighly compensated employees must benefit. Since 70 percent of 250 equals 175, it is possible for 62. the plan to qualify under the percentage test. b. Each plan must benefit the lesser of 50 employees or 40 percent of all employees, i.e., the lesser of 50 or 120. Since all 50 highly compensated employees benefit, both plans may qualify.a. Ann’s gross income includes neither her own nor her employer’s contribution and is therefore $30,000 less eight 63. percent, or $27,600. b. Ann’s salary of $30,000 is subject to social security tax. c. Ann’s employer’s compensation deduction equals Ann’s salary of $30,000, plus the extra five percent contributed, or $1,500, plus social security tax (employer’s share) paid on $30,000. d. Ann’s total contribution equals 13 percent of $30,000, or $3,900. 64. b. Yes, a 16-year-old baby-sitter may open an IRA as long as he or she has gross income from services rendered. c. Yes, a plan participant can write covered calls through an IRA. Most any investment can be made. d. Yes, the interest on a loan to make an IRA contribution is deductible, but it is investment interest. e. No, an IRA contribution cannot be made in IBM stock. Only cash contributions may be made, except for rollovers. f. No, an IRA cannot purchase term life insurance on the participant’s children. g. No, an IRA cannot be used as collateral for a loan. If it is, the account balance is deemed distributed. h. Yes, an IRA contribution may be made after the return is fi led up to the due date of the return (not including extensions). i. The participant must start withdrawing funds from the IRA by April 1 of the year following the year during which the participant attains the age of 70 1/2. a. If the payments are made from a nonquali fi ed, noncontributory, “pay-as- you-go” plan, $15,000 a year is gross income. 65. b. If the payments are made from a quali fi ed, fully funded, noncontributory plan, $15,000 a year is gross income.
Image of page 11
Image of page 12

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture