Question 1

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

Question 1 options:
1) The employee recognizes income on the date of grant.
2) The employee recognizes income on the date of exercise.
3) The employee recognizes ordinary income on the date of sale.
4) The employee recognizes capital gain income on the date of sale.

Question 2 

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

Question 2 options:
1) 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.
2) The account is funded through salary reduction plans.
3) The account funds can be used to pay or reimburse out-of-pocket medical expenses not covered by health insurance plans.
4) Amounts not used to reimburse expenses in the current coverage period can be carried forward for use in future reimbursement periods.

Question 3

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

Question 3 options:
1) The plan may discriminate in favor of highly compensated employees.
2) 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.
3) Any employee who has attained 21 years of age and completed one year's service must be allowed to participate.
4) Two of the above.
5) All of the above.

Question 4

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

Question 4 options:
1) The employer receives a deduction as contributions are made to the employee's account if the plan is unfunded.
2) The employee does not realize income when contributions are made to a funded plan which is not subject to a substantial risk of forfeiture.
3) 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.
4) The employer that funds a rabbi trust has an immediate deduction for contributions to the trust creating a beneficial interest for the employee.

Question 5

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

Question 5 options:
1) Contributions within limits are not included in the employee's income and are immediately vested.
2) The maximum contribution is the $17,500 for an employee who is 35 years of age and whose annual compensation is $65,000.
3) Employer contributions are not tax deferred.
4) Two of the above.
5) All of the above.

Question 6

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

Question 6 options:
1) 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.
2) 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.
3) 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.
4) Neither premiums nor medical expense reimbursements are excludable.

Question 7

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

Question 7 options:
1) The entire $6,000 reimbursement of child care expenses by an employer.
2) A $300 check to an employee for maintaining safety standards in the workplace.
3) On-campus housing provided to a professor at a monthly rent of $500, when the fair market value of this house is $150,000.
4) None of the above.

Question 8 

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

Question 8 options:
1) Code Sec. 415 imposes limits on the amount that may be contributed by an employee's account each year.
2) 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.
3) The employee is not taxed on contributions to the plan when made; thus, the employer receives no deduction at the time of the contribution.
4) 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.

Question 9

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

Question 9 options:
1) Stock which is not subject to a substantial risk of forfeiture triggers immediate compensation income to the employee.
2) Stock which is subject to a substantial risk of forfeiture triggers compensation income to the employee only when the stock is sold.
3) 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.
4) None of the above.

Question 10

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

Question 10 options:
1) 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.

2) A taxpayer who is over 70½ cannot make contributions to the account.
3) The earnings in a traditional IRA accumulate tax-free but not in a Roth IRA.
4) The taxpayer may withdraw contributions to pay for qualified higher education expenses but must pay a 10-percent early withdrawal penalty.