Cebs RPA 2 Exam with complete solutions

Section 79 - Answer- The annual cost of insurance can represent taxable income to the employees Section 83 - Answer- Taxation of property transferred in connection with the performance of services Section 125 - Answer- Permits the adoption of cafeteria or flexible benefit plans and provides that an employee can choose between taxable and non taxable compensation elements without problems of constructive receipt if certain conditions are met. Constructive Receipt - Answer- Income that is not yet received is considered received and, therefore currently taxable when it is credited to an account or set aside so it may be drawn on at any time and amounts receivable and are not subject to substantial limitations or restrictions 457 Plans - Answer- Nonqualified deferred compensation plans available only to state and local governmental employers and nongovernmental organizations exempt from tax under IRC Section 501 Elig Requirements of a Keogh Plan - Answer- 1. Only a sole proprietor (not a common law employee) or a partnership (not indiv. partner) can establish 2. If an owner employee wishes to establish & participate in a Keogh Plan he must cover ALL ees who are 21+ and have 1 year of service. A 2 yr WP can be used if the plan provides 100% vesting after 2 yrs 3. Must meet the same nondiscrimination coverage and participation requirements as other qualified plans. Keogh Plan Limits under defined benefit plan - Answer- The limit is the lesser of 100% of the average of the participants highest three consecutive calendar years of earnings or $205K Keogh Plan max contribution limits under defined contribution plan - Answer- Lesser of 100% of the comp or $51k in 2013. For the Self Employed person "comp" is person's earned income from selfemployment. less one half of the self employment tax. not to exceed $255K. Keogh Plans and Loans - Answer- Loans from Keogh plans are generally permitted due to EGTRRA.