Solution
David answered on
Dec 23 2021
1) Any person who is a 5% owner of the company or a person whose salary in a company is
more than $110000 is called highly compensated employee.
2) Minimum Vesting requirement will have a very bad impact on the highly compensated
employee. This will at the initial phase of time will generate very low income to the highly
compensated employee.
3) Maximum amount that a self employed can contribute to Keogh plan in 2012 is 25% of net
earnings or 50000$ whichever is lower , whereas In 2013 he can contribute 25% of net
earnings or 51000$ whichever is lower.
4) Keogh plan can include 401(k) plan when its not either a SEP or Roth IRA.
5) The two alternative tests to comply with the minimum coverage requirements are as
follows:
a) Ratio Coverage Test
) Alternative Coverage Test
6) Ratio Coverage Test : There are Several Test to perform this Coverage Test :
Step 1: In this step all employees are given chance to participate in the test
Step 2: Divide all the eligible employees into two groups: HCE’s and NHCE’s.
Step 3: Divide the number of NHCEs to get benefit in the plan by the total number of all non
excludable NHCEs.
Step 4: Divide all the HCEs to get benefit in the plan by the total number of all non-
excludable HCEs.
Step 5: Divide the NHCE percentage in #3 above by the HCE percentage in #4 above .If the
outcome comes to greater than 70% , than coverage test is passed.
7) Disparity which in the rate of employer contribution is given to all the accounts of
employee under some approved contribution plan and it’s permitted under section 401(i) is
called Permitted Disparity.
8) A plan is said to be top heavy plan if the total value of accrued benefits or account
alances of key employees is more than 60% of total value of accrued benefits is called top
heavy plan.
9) The process is that you have to get registered for IRS Purposes as per US Taxation rule.
10) To,
Sam Tangy,
Tangy Corporation
Benefit of qualified plan is that it will boost the morale strength of employee and they will
feel to work in your organization which in turn will boost your production.
True or False:
11) True , Yes it true because here income is coming and anything where income is coming
or taxable alimony are eligible to set up an IRA.
12) True, yes minimum of 90 days are given for a lump sum of employee distribution to not
to be taxed if there is a rollover of benefits but not more than 90 days.
13) False , payments of retirement benefits to an employee’s beneficiary are not taxed in the
same way as if the employee has received them.14) False, a minimum participation rule for
defined benefits plans requires that they generally benefit the lesser of 50 employees or 50
percent of all employees and not 40% percent of employees.
15) True, Payments of retirement benefits to a self-employed individual must begin no later
than age 65½ and if it received before 65.5 years of age than it will be taxable.
16) True , an employee stock ownership plan is a qualified and defined contribution plan.
17) True, Excess contributions to an IRA are subject to a 10 percent excise tax, which is
deductible for tax purposes.
18) True, A distribution from an IRA to an individual is generally subject to 10 percent
penalty tax if the individual has not yet reached age 59½ because it will have a negative
impact end once everyone will start doing it will become a regular practice .
19) False, an employee’s participation is not the tax qualified plan of one employer as it does
not preclude any participation in a tax qualified plan offered by a second employer.
20) True, Keogh plan is formed mainly to benefit the individuals.
Letter answer:
21) As per the rule if the age of an individual is 50 or more than 50, than they can take the
deduction of Rs $6000. Here Pois and Lois lee are two persons, so totalling they can get
maximum allowable IRA deduction in 2013 return is $12000.
Ans) c) $12000
22) As the age of iga ko
is less than 50 , and her total income including alimony is 34900
so she can get maximum deduction of $5000.
Ans) b) 5000
23) As Emil is covered by employer’s pension plan he will not get any deduction but July is
not covered by any employer’s plan so she will get a deduction of $5000.
Ans b) 50000
24) As both Fred and welcome are having good income by way of salary , interest income
and in form of cash prize , they are eligible to take deduction and moreover age of both of
oth of them is more than 50, so they can take a maximum deduction of $ 6000 each totalling
$12000.
Ans) C) $12000
25) As per US Taxation rule , maximum contribution to qualified retirement plan for 2013
will be $5500 i
espective of any income he earn.
Ans) b) $5500
26) As per simplified employee pension, a person can take maximum deduction of 25% of
net earning but limiting to 51000$, here income of Wally Wader is $30000 so , 25% of
which is coming to $7500 .
Ans) d) $7500
27) Jey Jermaine will get a deduction of $ 1500 because its said that the deduction allowed is
25% of net earning up to 50000$ or actual paid .Here actual paid is $ 1500 so it will be
allowed.
Ans ) C) $1500
28) Henry and Wilma has filed a joint return and both of them have a age lesser than 50 , as
per the retirement benefit plan , maximum deduction allowable will be 5000 each totaling to
$10000.
Ans) c) 28000
29) Minimum of 20% of the money he deposited to the plan must be contributed to the
account of employees under the plan of 2013 which is $1800.
Ans) a) $1800
30) 25% is the maximum allowable deduction for a self employment retirement plan for 2013
is allowed. So for Jackson it will come to around 25% of $4000 which is $1000 or $50000
whichever is lower, Hence Jackson maximum Self employment retirement plan deduction for
2013 is $1000.
Ans) d) $1000
Ethics:
31) As per US taxation rule, a person cannot take the funds from IRA as it’s a nation rule, to
maintain equality so whether Betsy father might be a president, she has to pay a penalty of
10% which cannot be avoided. However, if there is early need of cash,...