4. Zofia works for Red Corporation, which has a contributory defined contribution pension plan. The employer's monthly contribution to the plan is 4 percent of each participating employee's monthly salary, while the employee also contributes 4 percent. Which of the following statements best describes the benefits of the plan?

A) Red receives a deduction for its contributions to the plan when Zofia receives a distribution from the plan.

B) While Zofia is taxed on the employer's contributions to the plan, her own contributions are not taxed until she receives a distribution from the plan.

C) The amounts contributed to the plan and the earnings on those contributions are not taxed to Zofia until she retires or receives a distribution from the plan.

D) Zofia may deduct her own contributions to the pension plan, and Zofia reports income from the plan each year until she receives distributions from the plan.

5. Jackson Corporation granted an incentive stock option to employee Caroline on January 1, two years ago. The option price was $150, and the FMV of the Jackson stock was also $150 on the grant date. The option allowed Caroline to purchase 160 shares of Jackson stock. Caroline exercised the option on August 1, 2017, when the stock's FMV was $250. Unless otherwise stated, assume Caroline is a qualifying employee. If Caroline sells the stock on July 5, 2018, for $400 per share, she must recognize

A) long-term capital gain of $40,000 in the year of sale.

B) long-term capital gain of $24,000 in the year of sale.

C) ordinary income of $16,000 on the exercise date and a long-term capital gain of $24,000 in the year of sale.

D) ordinary income of $16,000 and a short-term capital gain of $24,000 in the year of sale.

6. During 2018, Asmita , who is single and is covered under a pension plan at work, contributes $5,500 into a Roth IRA. If her AGI is $62,500, which of the following is true?

A) None of the contribution is deductible.

B) All of the contribution is deductible.

C) She must withdraw all of the contribution immediately since she is covered under a plan at work.

D) Only 75% of the contribution is deductible since her AGI exceeds $60,000 by $2,500 and her maximum contribution is phased out by 25%.