Accounting Question

1. Explain why an employer would decide whether to have a qualified or nonqualified retirement plan. What provisions would the employer consider including in each type of plan?
2. Name and describe 3 fringe benefits that the employer may provide to an employee tax free and what discrimination rules, if any, apply to those benefits.Be sure to specify the code sections that provide the income tax exclusion for the benefit.
3. What is an accountable plan, what rules apply to these plans and why is such a plan important?
4. What is an FSA, what rules apply to FSAs plans and why do employers use these plans?
5. Under a nonqualified deferred compensation arrangement, when are amounts taxable to the service provider and when does an accrual basis employer get the deduction?
6. When are property transfers taxed to an individual and when does the employer get a deduction for such transfers? Are there any instances in which an employee can choose the year of taxation for property transfers?
7. An employer has heard mixed reviews with respect to how effective ISOs are in terms of motivating employees but she tells you that she would like to try them and wants to grant some ISOs to her most trusted employee, Susan. With your help, Susan is granted ISOs on 500 shares of KPI stock on September 15, 2019 with an exercise price of $7 a share, equal to the fair market value of the stock on that date. Susan vests in the right to exercise the options on the anniversary date of the grant at the rate of 100 shares a year each year over the next 5 years. Assume that Susan exercises the 200 options in which she is vested on March 15, 2022 when the fair market value is $10/share, and she sells all 200 of the shares for $12/share on December 31, 2022.

a. Can Susan make a section 83(b) election with respect to the options themselves?In other words, can she elect to include the value of the options in her

income on the date of grant and thereby avoid any tax consequences on date of exercise? Cite authority in either the code or regulations for your answer, if

there is any authority.

b. What are the tax consequences to both Susan and to KPI on September 15, 2019, September 15, 2020, September 15, 2021, March 15, 2022 and December

31, 2022?

8. John, age 50, has a business with the following employees:

Employee Date of Birth Employment Start Date Compensation

A 4/24/1985 6/30/2017 $56,000

B 6/25/1976 2/30/2010 $120,000

C 3/15/1987 4/25/2008 $75,000

D 2/4/1997 7/14/19 $87,000

E 2/28/1993 10/14/2012 $47,000

John earns $450,000 and has for about 4 years.There is no retirement plan now and John would like to adopt one that will give him personally the most benefit and cost the minimum amount for his employees.What plans should John consider?Explain what plan or plans you would recommend to John and why you make that recommendation. For your recommended plans, be sure to include specific plan design features that the plans would include.

9. IRC Section 409A has 3 requirements that all nonqualified deferred compensation arrangements must meet in order to avoid noncompliance.What are those

requirements?What are the penalties for noncompliance?

10. How does a taxpayer determine if compensation amounts are reasonable?What is the tax result if the IRS determines that compensation paid to shareholder

employees is not reasonable?

11. List 3 exceptions to the application of IRC Section 409A to nonqualified deferred compensation arrangements?