Income

Question 1

are stock dividends on preferred stock and common stock taxable?

Answer 1

Preferred - yes

Common - no

Question 2

For income tax purposes for an accrual based taxpayer, income is earned when

Answer 2

• all the events have occurred to attach the taxpayers rights to receive the income
• the amount of income can be determined with reasonable accuracy

Question 3

what are the requirements of a cafeteria plan?

Answer 3

1) all participants must be employees;
2) participants may choose between two or more benefits composed of cash or qualified benefits;
3) participants are required to make elections among the benefits;
4) the plan must be in writing and have certain specified information;
5) the plan may not provide participants with deferred income, except for under 401(k) plans.

Question 4

if employees are reimbursed for business expenses under a nonaccountable plan, does the EE have to include that amount in gross income?

Answer 4

yes

Question 5

how much of a groupterm life insurance provided by an ER is a tax free fringe benefit ?

Answer 5

the first $50k

Question 6

how much is the penalty tax if you withdraw money early from an ira/401k

Answer 6

10% penalty tax