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Babson Corporation is proposing the creation of a qua lified
profit -sharing plan for its employees. The proposed plan provides for vesting
of employer contributions after 20 years because the company wants to
discourage employee turn – over and does not feel that short -term employees
should qualify for benefits. Will this plan qualify? Why or why not?

Explain how distributions from a qua lified pension plan,
which are made in the form of annuity payments, are reported by an employee
under the following circumstances : a. No employee contributions are made to
the plan. b. The pension plan provides for matching employee contr ibutions.

Sally, who is single and age 40, made deductible IRA
contributions in several early years, bur has nor been eligible to make
deductible IRA contributions for the last 5 years because she is covered under
her employer’s plan. Her AGI is $100,000. She is interested in making IRA
contributions in the current year. What advice would you give her?

1. Discuss the major features of a Coverdell Education
Savings Account (CESA)
2. The owner of an unincorporated small business is
considering whether to establish a simplified employee pension (SEP) plan for
its employees.
a. What nonrax factors might make a SEP attrac – tive as an
alternative to establishing a qualified pension or profit -sharing plan?
b. ls the owner of the small business eligible to make
contributions on his or her behalf ro the SEP?

David is an independent contractor who has been in the
consulting business for several years. David has applied and been accepted into
a prestigious MBA program. The program is two years in duration. David has
decided to suspend his consulting activities to complete the MBA degree. David
plans to resume his consulting business in two years. David wants to deduct his
education expenses. What are the relevant tax issues in this case?

Busin ess-Related Expenses. Mike, a self-employed
consultant, incurs the following business-related expenses in 2019:
Mike earned $130,000 of gross income from his consulting
business and had $12,000 of interest and dividend income in 2019 before any of
the above expenses are deducted. He has $20,000 of itemized deductions. Mike is
married and files a joint return with his wife, Ann, who has no income.
a. What is the amount of Mike’s deduction for
business-related expenses for 2019?
b. What is Mike and Ann’s AGI and taxable income in 2019,
assuming he is married and files a joint return, and ignoring the
self-employment tax?