Final Exam > Question 1
Generally, a nonqualified deferred plan must cover a broad spectrum of employees. Specifically, the plan must:
Cover all full-time employees who are age twenty-five and over on a nondiscriminatory basis
Cover 70 percent of all nonhighly compensated employees on a nondiscriminatory basis
Be funded
XXNone of the above
Final Exam > Question 2
A nonqualified deferred compensation plan is an agreement that provides an employee with future compensation as part of compensation:
For work performed in the future
XXFor work performed currently
For work that will never be performed
None of the above
Final Exam > Question 3
Generally, constructive receipt, for purposes of inclusion of income in the employee’s gross income and current taxability, occurs when:
The plan is unfunded
XXThe plan is unfunded and unsecured
(correct)The plan is funded and secured
None of the above
Final Exam > Question 4
Alberto Ancidi and his employer have agreed that part of his compensation ($20,000) should be deferred until five years from now. Should the $20,000 be included in Alberto’s income?
XXYes, in the current year, the year Alberto’s services are performed even if the amount is subject to a substantial risk of forfeiture.
Yes, in the current year, if there is no substantial risk of forfeiture of the amount and Alberto will perform the related services three years from now.
(correct)Yes, two years from now, when the amount is not subject to a substantial risk of forfeiture even if Alberto performed the services in the current year.
None of the above
Final Exam > Question 5
If Alberto Ancidi is an employee, the entire amount of nonqualified deferred compensation is required to be reported on:
Form 1099-MISC
Form 1099-DEF
XXForm W-2
Form W-2 (DEF)
Final Exam > Question 6
An arrangement under which the employer places assets into an irrevocable trust to secure the payment of promised deferred compensation to selected employee is:
A qualified deferred compensation plan
XXA rabbi trust
An employee stock option plan
None of the above
Final Exam > Question 7
Under an employee stock purchase plan, an employee-participant may own:
7 percent of the company-grantor’s stock immediately before the grant date
5.5 percent of the company-grantor’s stock immediately before the grant date
XX4.1 percent of the company-grantor’s stock immediately before the grant date
None of the above
Final Exam > Question 8
Twenty-Four Street Corporation offered an employee (Mike Rodrigo) a stock purchase plan. The employee’s stock purchase price was retroactively determined to be $30. How much may Mike purchase the stock for (including discount)?
$24
$21
XX$25
$20
Final Exam > Question 9
Which of the following requirements is not applicable to incentive stock options?
The exercisable date must be within ten years of the grant date.
The option price must not be less than the fair market value at grant date.
The option must be nontransferable to third parties, except at death.
XXNone of the above
Final Exam > Question 10
Incentive stock options have to satisfy a holding period requirement. This requirement requires the following, except:
XXThe employee must hold the stock for one year after separation from the granting employer.
The employee must hold the stock for at least one year after the exercise date.
The employee must hold the stock for two years after the grant date.
The exercise date must not occur more than three months after “employee” status has terminated.
Final Exam > Question 11
Robert Jones was granted a nonqualified stock option by his employer that did not have a readily ascertainable fair market value. When does a taxable event occur for Robert?
The granting of the option by the employer
XXThe exercise of the option by Robert
The expiration of the option
None of the above
Final Exam > Question 12
Robert Jones was granted a nonqualified stock option by his employer (Acme Corp.) that had a readily ascertainable fair market value. Acme may deduct the granted option value upon:
XXThe granting of the option by the employer
The exercise of the option by Robert
The expiration of the option
None of the above
Final Exam > Question 13
An employee, a restricted stock recipient, is taxed on such stock when:
The restricted stock is granted
The restricted stock grant is declared
XXThe restricted stock recipient’s rights in the stock become transferable
None of the above
Final Exam > Question 14
The difference between variable annuity contracts and mutual funds is:
XXThe investor pays no taxes on the income and investment gains from the annuity until the money is withdrawn.
The investor pays no taxes on the income and investment gains from the mutual fund until the mutual fund shares are sold.
If a mutual fund investor dies before he or she sells his shares, the investor’s designated beneficiary is guaranteed to receive a specific amount.
None of the above
Final Exam > Question 15
America Corp. is an accrual method taxpayer that follows a calendar tax year. In Year 1, Claire Leal, a cash method taxpayer, provides America with office cleaning services valued at $2,000. America pays Claire $500 on March 15, Year 2. Fifteen days later, on March 30th, America pays Claire the remaining balance of $1,500. How much is America permitted to deduct in Year 1?
XX$500
$1,500
$2,000
Nothing