AWMA EXAM 1 EXAM WITH CORRECT
ACTUAL QUESTIONS AND CORRECTLY
WELL DEFINED ANSWERS LATEST
ALREADY GRADED A+ 2025 – 2026
Which one of the following accurately represents the
general tax consequences to an employer and employee
under a nonqualified plan?
A) An employer does not receive a deduction for a
contribution to an employee until the employee recognizes
the income upon receipt.
B) An employer receives a deduction when asset
investments are made to informally fund an employee's
nonqualified plan benefit and the employee recognizes an
identical amount as income at the same time.
C) An employer receives a deduction for a contribution to an
employee when paid, and the employee will not be taxed
on the contribution until it is withdrawn.
,D) An employer receives an immediate deduction for a
contribution when made, and the employee will recognize
income when the amount credited to his or her account is
nonforfeitable. - ANSWERS-A) An employer receives a
deduction for a contribution when an employee recognizes
the income, and not before that. Mod 6
Which one of the following statements regarding a qualified
plan is correct?
A) Certain plans are partially exempt from ERISA
requirements.
B) The plan may discriminate.
C) The employer's deduction is available in the year that a
contribution is made.
D) Distributions from pension plans are taxed at capital
gains rates if contributions have been in the plan for more
than 12 months. - ANSWERS-C) With a qualified plan, the
employer may deduct plan contributions in the year that
those contributions are made. Mod 6
Which statement is true with regard to a rabbi trust?
,A) Rabbi trust assets are excluded from general creditors in
bankruptcy proceedings.
B) Distributions from a rabbi trust can be rolled over to an
IRA.
C) The employer is taxed on taxable earnings in the plan as
they accumulate.
D) The trust assets may be available for general use by the
employer. - ANSWERS-C) In a rabbi trust, as plan earnings
accumulate they are taxed to the employer. (Mod 6)
Tax deferral in an unfunded plan
A) may be achieved if plan assets are subject to company
creditors.
B) may be achieved if the deferral is agreed upon at any
time prior to the compensation being paid.
C) depends on whether an executive's right to
compensation is subject to a substantial risk of forfeiture.
D) may be achieved even if an executive's compensation is
subject to constructive receipt. - ANSWERS-A) The
employer's promise must be merely a naked promise and
must not be secured in any fashion. Mod 6
, A funded deferred compensation plan
A) does not avoid current income taxation.
B) will provide an immediate deduction to an employer.
C) will be taxable to an employee if nonforfeitable.
D) must be made available to all employees. - ANSWERS-C)
If the employee has constructive receipt of plan
compensation (funds are nonforfeitable), such
compensation will be taxable to the employee. Mod 6
Concerning control of assets in a private foundation versus a
donor-advised fund, which one of the following aspects is
true for a donor-advised fund?
A)Remains with founder's values
B) Needs lengthy IRS approval
C) Easier and less expensive to launch
D) Must pay out a certain percentage each year - ANSWERS-
C) Donor-advised funds (DAFs) are growing in popularity
and have the advantage of being easier and cheaper to
launch and not requiring the lengthy IRS approval that
private foundations need. Values may change with a DAF, as
major contributors have input into this type of charitable
ACTUAL QUESTIONS AND CORRECTLY
WELL DEFINED ANSWERS LATEST
ALREADY GRADED A+ 2025 – 2026
Which one of the following accurately represents the
general tax consequences to an employer and employee
under a nonqualified plan?
A) An employer does not receive a deduction for a
contribution to an employee until the employee recognizes
the income upon receipt.
B) An employer receives a deduction when asset
investments are made to informally fund an employee's
nonqualified plan benefit and the employee recognizes an
identical amount as income at the same time.
C) An employer receives a deduction for a contribution to an
employee when paid, and the employee will not be taxed
on the contribution until it is withdrawn.
,D) An employer receives an immediate deduction for a
contribution when made, and the employee will recognize
income when the amount credited to his or her account is
nonforfeitable. - ANSWERS-A) An employer receives a
deduction for a contribution when an employee recognizes
the income, and not before that. Mod 6
Which one of the following statements regarding a qualified
plan is correct?
A) Certain plans are partially exempt from ERISA
requirements.
B) The plan may discriminate.
C) The employer's deduction is available in the year that a
contribution is made.
D) Distributions from pension plans are taxed at capital
gains rates if contributions have been in the plan for more
than 12 months. - ANSWERS-C) With a qualified plan, the
employer may deduct plan contributions in the year that
those contributions are made. Mod 6
Which statement is true with regard to a rabbi trust?
,A) Rabbi trust assets are excluded from general creditors in
bankruptcy proceedings.
B) Distributions from a rabbi trust can be rolled over to an
IRA.
C) The employer is taxed on taxable earnings in the plan as
they accumulate.
D) The trust assets may be available for general use by the
employer. - ANSWERS-C) In a rabbi trust, as plan earnings
accumulate they are taxed to the employer. (Mod 6)
Tax deferral in an unfunded plan
A) may be achieved if plan assets are subject to company
creditors.
B) may be achieved if the deferral is agreed upon at any
time prior to the compensation being paid.
C) depends on whether an executive's right to
compensation is subject to a substantial risk of forfeiture.
D) may be achieved even if an executive's compensation is
subject to constructive receipt. - ANSWERS-A) The
employer's promise must be merely a naked promise and
must not be secured in any fashion. Mod 6
, A funded deferred compensation plan
A) does not avoid current income taxation.
B) will provide an immediate deduction to an employer.
C) will be taxable to an employee if nonforfeitable.
D) must be made available to all employees. - ANSWERS-C)
If the employee has constructive receipt of plan
compensation (funds are nonforfeitable), such
compensation will be taxable to the employee. Mod 6
Concerning control of assets in a private foundation versus a
donor-advised fund, which one of the following aspects is
true for a donor-advised fund?
A)Remains with founder's values
B) Needs lengthy IRS approval
C) Easier and less expensive to launch
D) Must pay out a certain percentage each year - ANSWERS-
C) Donor-advised funds (DAFs) are growing in popularity
and have the advantage of being easier and cheaper to
launch and not requiring the lengthy IRS approval that
private foundations need. Values may change with a DAF, as
major contributors have input into this type of charitable
