An employee has enrolled in his company's nonqualified deferred compensation plan. The benefit paid at the time of the employee's retirement is:. A) taxable as ordinary income to the employee and can be taken as a deduction by the employer.
B) taxable as ordinary income to the employee with no benefit allowed to the employer.

A) taxable as ordinary income to the employee and can be taken as a deduction by the employer.

Explanation:

When an employee defers to receive the compensation plan he gets the benefit of lower tax bracket each year, ultimately decreasing his tax liability.

Further when he receives the complete amount his income stands taxable. Accordingly at that time ordinary tax rates as per FICA are applicable.

On the employers part it is only deductible when the employee includes it in the income of the year, and pays tax on such compensation received.

Thus, when he receives it as compensation on retirement it is normally taxable at ordinary rates to the employee and deduction can be claimed by the employer.

in 2001, dell computer became the world’s largest personal computer vendor, continuing to

gain market share and post profits in an industry struggling with slumping sales and billions of

dollars in losses. dell sells 90% of its pcs directly to the final customer, largely bypassing the

reseller channel that accounts for most of the world’s pc sales. this direct customer relationship

is the key to dell’s business model, and provides distinct advantages over the indirect sales

model. dell’s direct relationship with the customer allows it to tailor its offerings to customer

needs, offer add-on products and services, and use the internet to offer a variety of customer

services. in addition, dell’s pcs are built to customers’ specifications upon receipt of an order,

giving dell additional advantages over indirect pc vendors who must try to forecast demand and

ship products based on those forecasts. dell’s direct sales and build-to-order model has achieved

superior performance in the pc industry in terms of inventory turnover, reduced overhead, cash

conversion, and return on investment (kraemer, et al., 2000).

explanation: