QUESTION 16

The following is a tax benefit associated with fringe benefits:

Because they are forms of non-cash compensation they are not taxable as income even without a statutory exclusion.

The value of the benefit is excludable from the income of the employee pursuant to a statutory exclusion.

The value of the benefit is deductible by the employer, although not included in the taxable income of the employee.

All of the above.

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QUESTION 17

The following is a true statement about the tax consequences of employer-provided health insurance:

Premiums paid by the employer are excluded from the employee's income, but payments received to reimburse medical expenses from the health plan are includible in income.

Premiums paid by the employer are included in the employee's income as compensation, but payments received to reimburse medical expenses from an employer-provided health plan are excluded.

Premiums paid by the employer are excluded from the employee's income, and payments received to reimburse medical expenses from an employer-provided health plan are excludable from income.

Neither premiums nor medical expense reimbursements are excludable.

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QUESTION 18

The following is excluded from the taxable income of the recipient under a specific statutory exclusion of the Internal Revenue Code:

The entire $6,000 reimbursement of child care expenses by an employer.

A $300 check to an employee for maintaining safety standards in the workplace.

On-campus housing provided to a professor at a monthly rent of $500, when the fair market value of this house is $150,000.

None of the above.

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QUESTION 19

Fringe benefits excludable from the employee's income under Code Sec. 132 include the following:

No additional cost services, such as a seat on an airplane, for an employee working in the restaurant industry.

A discount that allows an employee to purchase clothes from the store in which he works at a 20-percent discount (the gross profit percent is 30 percent).

The difference in the value and the cost of meals provided at an employer cafeteria which operates at a loss.

An employer reimbursement for the cost of storing household goods after moving.

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QUESTION 20

The following is true about a flexible spending account:

A cafeteria plan can take the form of a flexible spending account.

Disbursements used to reimburse health or dependent care costs are excluded from the employee's income.

Contributions may be subject to the "use it or lose it" rule.

All of the above.

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QUESTION 21

A difference between a Health Reimbursement Account (HRA) and a Health Savings Account (HSA) is:

The Code Sec. 105 exclusion for employer-provided health insurance and the exclusion for payments received under those plans to reimburse qualified medical expenses under Code Sec. 106 apply.

The account is funded through salary reduction plans.

The account funds can be used to pay or reimburse out-of-pocket medical expenses not covered by health insurance plans.

Amounts not used to reimburse expenses in the current coverage period can be carried forward for use in future reimbursement periods.

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QUESTION 22

The following is a characteristic of a retirement plan that meets the qualifications of Code Sec. 401:

The plan may discriminate in favor of highly compensated employees.

The plan may not engage in transactions with a disqualified person because it must be operated for the exclusive benefit of the participants and their beneficiaries.

Any employee who has attained 21 years of age and completed one year's service must be allowed to participate.

Two of the above.

All of the above.

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QUESTION 23

The tax consequences associated with a qualified plan include the following:

Code Sec. 415 imposes limits on the amount that may be contributed by an employee's account each year.

The employee is not taxed on the contributions to the plan, but must pay tax on the income from the account as it is earned.

The employee is not taxed on contributions to the plan when made; thus, the employer receives no deduction at the time of the contribution.

Contributions must be made by the tax year-end and the aggregate amount that an employer may deduct for contributions made during the year is limited.

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QUESTION 24

Which of the following is a tax consequence associated with a cash or deferred arrangement, also known as a 401(k):

Contributions within limits are not included in the employee's income and are immediately vested.

The maximum contribution is $17,500 for an employee who is 35 years of age and whose annual compensation is $65,000.

Employer contributions are not tax deferred.

Two of the above.

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QUESTION 25

The following are qualified retirement plans available to self-employed individuals that allow them to make contributions for themselves and their employees in excess of traditional IRAs without the cost associated with administering qualified corporate plans:

SEP-IRAs and 403(b) Plans.

SEP-IRAs and SIMPLE Plans.

SEP-IRAs.

SEP-IRAs, SIMPLE Plans and Defined Contribution Plans.

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QUESTION 26

The following are tax benefits associated with both traditional IRAs and Roth IRAs:

The maximum contribution that can be made in the current tax year is $5,500 if the taxpayer is less than 50 years of age, subject to AGI limitations.

A taxpayer who is over 70 cannot make contributions to the account.

The earnings in a traditional IRA accumulate tax-free but not in a Roth IRA.

The taxpayer may withdraw contributions to pay for qualified higher education expenses but must pay a 10-percent early withdrawal penalty.

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QUESTION 27

The following tax consequence(s) result for a non-qualified deferred compensation plan:

The employer receives a deduction as contributions are made to the employee's account if the plan is unfunded.

The employee does not realize income when contributions are made to a funded plan which is not subject to a substantial risk of forfeiture.

The employee that holds a beneficial interest in a rabbi trust is not taxed on contributions made to the trust because the funds are reachable by the employer's creditors.

The employer that funds a rabbi trust has an immediate deduction for contributions to the trust creating a beneficial interest for the employee.

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QUESTION 28

The following is true of stock given to an employee as compensation:

Stock which is not subject to a substantial risk of forfeiture triggers immediate compensation income to the employee.

Stock which is subject to a substantial risk of forfeiture triggers compensation income to the employee only when the stock is sold.

The employee may not elect to treat the spread between the fair market value of the stock (treated as though no restrictions exist) and the amount paid for it as compensation income at the time of grant.

None of the above.

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QUESTION 29

The following tax consequence results from the grant of qualifying incentive stock options (ISOs) to an employee, which meets statutory requirements:

The employee recognizes income on the date of grant.

The employee recognizes income on the date of exercise.

The employee recognizes ordinary income on the date of sale.

The employee recognizes capital gain income on the date of sale.

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QUESTION 30

Steve is a sole proprietor of a construction company. His net earnings from self-employment are $65,000; his self-employment tax due is $9,380. He is not a participant in any other qualified plan. He has one employee, Kevin, whose salary is $25,000. What is the maximum deductible contribution Steve can make to his SEP-IRA and Kevin's?

$10,233 to his own IRA and $5,000 to Kevin's IRA.

$9,248 to his own IRA and $6,250 to Kevin's IRA.

$9,248 to his own IRA and $5,000 to Kevin's IRA.

$11,650 to his own IRA and $6,250 to Kevin's IRA.

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QUESTION 31

The following is a method used to determine the fair market value of property transferred for gift or estate tax purposes:

The trading price of a publicly-traded security on the date of gift.

The trading price of an intermittently-traded security on the date of gift.

The face value of a note receivable.

For a unique asset, the donor's best guess.

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QUESTION 32

Which of the following transactions would most likely be characterized as a taxable gift (without considering the annual exclusion)?

Bob sells his car to Florence for $2,000 the current blue book value.

Bob sells his car to his son Bert for $500; although the blue book value is $2,000.

Bob pays his son Bert's $15,000 tuition at Quality State University.

Bob gives $1,000 to St. Joseph's Hospital.

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QUESTION 33

In 2016, the unified transfer tax credit applied to lifetime gifts is:

$780,800.

$192,500.

$2,125,800.

$5,450,000.

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QUESTION 34

Cloris creates a joint bank account with her daughter Bess. She funds the bank account with her own $50,000. What is the amount of the taxable gift to Bess when the account is created?

$50,000.

$25,000.

$0.

$12,000.

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QUESTION 35

Alma gives $100,000 worth of publicly-traded stock to her son Murdoch to buy his love and affection. Murdoch does not want to accept the gift and writes a letter to his mother the week after receiving the stock indicating his refusal. He sends the letter and the stock certificates issued in his name back to his mother. This is an example of what estate planning mechanism?

Gift-splitting.

The annual exclusion.

The charitable deduction.

A qualified disclaimer.