ACCT Exam 3

When employees contribute to a ROTH 410(k) account, they _____ allowed to deduct the contributions and they ____ taxed on qualified distributions from the plan.

Are not; are not

Which of the following statement regarding compensation is false?

Bonuses paid within two and a half months of year-end are included in employee's compensation in the year they were earned.

Which of the following statements regarding IRAs is false?

Taxpayers who have made nondeductible contributions to a traditional IRA are taxed on the full proceeds when they receive distributions from the IRA.

which of the following statements is true regarding the $1,000,000 limit on covered employees for publicly traded companies?

The limitation applies only to the CEO, CFO, three other highest compensated officers, and all covered employees from previous years.

Which of the following statements regarding defined benefit plans is false?

employees bear the investment risk of the plan

Which of the following is true concerning employer funding of nonqualfiied deferred compensation plans?

employers may discriminate in terms of who they allow to participate in the plan

Which of the following is not an example of a non-taxable fringe benefit?

group-team life insurance policy providing $100,000 of coverage

Which of the following is not a requirement of a "qualified employee discount"?

the discount can be elected up to five annually.

Aharon exercises 10 stock options awarded several years ago. The following information pertains to the options: (1) each option gives the employee the right to buy 10 shares, (2) the market price on the grant date was $7, (3) the strike price is $10, and (4) the market price on the exercise date was $15. How much will it cost Aharon to purchase the options on the exercise date? A. $90. B. $500. C. $700. D. $1,000.

$1,000

Bad Brad received 20 NQOs (each option gives him the right to purchase 30 shares of stock for $10 per share) from his employer. At the time he started working the stock price was $11 per share. Now that the share price is $25 per share, he intends to exercise all of the options. Two years later Bad Brad sells the stock for $27 per share, what is Bad Brad's basis in his stock for purposes of calculating the gain or loss? a) $6,000. b) $9,000. c) $15,000. d) $16,200.

$15,000

Lisa, age 45, needed some cash so she withdrew $50,000 from her Roth IRA. At the time of the distribution, the balance in the Roth IRA was $200,000. Lisa established the Roth IRA eight years ago. Through a conversion and annual contributions, she has contributed $80,000 to her account. What amount fo the distribution is taxable and subject to early distribution penalty?

$50,000

Kathy is 60 years of age and self-employed. during 2020 she reported $500,000 of reveneus

$57,000

Amy is single. During 2020, she determined her adjusted gross income was $12,000. During the year, Amy also contributed $1,500 to a Roth IRA. What is the maximum saver's credit she may claim for the year.

$750

Stevie recently received 1,000 shares of restricted stock from her employer, Nicks Corporation, when the share price was $8 per share. Stevie's restricted shares vested three years later when the market price was $11. Stevie held the shares for a little more than a year and sold them when the market price was $16. What is the amount of Stevie's ordinary income with respect to the restricted stock? A. $0. B. $5,000. C. $8,000. D. $11,000.

$8,000

Which of the following statements regarding self-employed retirement accounts is true?

A self-employed taxpayer who has hired employees may not set up an individual 401(k).

Which of the following statements is true regarding distributions from Roth 401(k) accounts?

A taxpayer receiving a non qualified distribution from a Roth 401(K) account may be taxed on a portion but not all of the distribution.

Which of the following statements regarding contributions to defined contribution plans is true?

The tax laws limit the sum of the employer and employee contributions to a defined contribution plan.

Which of the following is true regarding stock options?

There is typically no tax effect on the grant date.

Which of the following statements regarding employer=provided educational benefits is true?

Up to $5,250 in tuition benefits can be excluded.

Which of the following items is not included on an employee's form W-2?

Value of stock options granted during the year.