Question 1

At the end of 2015,Erin was 73 years old and her traditional IRA had a balance of $200,000.She properly withdrew $8,403 from her IRA in 2016.In 2016,her IRA assets earned $25,000.What amount must Erin take as a distribution from her IRA in 2017?

Accepted Answer

Erin's required minimum distribution (RMD) for 2017 can be calculated as follows:

Step 1: Calculate the IRA balance as of December 31, 2016:
$200,000 (initial balance) + $25,000 (earnings) - $8,403 (2016 withdrawal) = $216,597

Step 2: Use the IRS Uniform Lifetime Table to find the distribution period for a 74-year-old (her age on December 31, 2016):
Her distribution period is 23.8 years.

Step 3: Divide the IRA balance by the distribution period to get the RMD for 2017:
$216,597 ÷ 23.8 = $9,108.82

So, Erin must take a distribution of $9,108.82 from her IRA in 2017. The closest option to this amount is B) $9,458.

Question 2

Which of the following statements regarding a Coverdell Education Savings Account (CESA)is correct?

Accepted Answer

An individual can be the beneficiary of multiple CESAs, but the total contributions to all CESAs for that beneficiary cannot exceed $2,000 per year.

Question 3

Which of the following statements is incorrect?

Accepted Answer

Annuity payments can vary in amount; they can be fixed or variable, depending on the terms of the annuity contract.

Question 4

Gwen is age 51,married,and reported AGI of $102,000 in tax year 2017.She is an active participant in her employer's pension plan.What amount of deductible IRA contribution is disallowed in 2017?

Accepted Answer

The answer of Gwen is age 51,married,and reported AGI of...

Question 5

Chandelle and Treymane are married and have combined AGI of $215,000.They would like to contribute to a Coverdell Education Savings Account for their grandson.What is the maximum contribution they can make in 2017?

Accepted Answer

The answer of Chandelle and Treymane are married and have...

Question 6

All of the following are employer-sponsored plans except:

Accepted Answer

A Coverdell Education Savings Account is not an employer-sponsored plan, but a tax-advantaged savings account established by an individual to pay for qualified education expenses for a designated beneficiary. B, C, and D are all types of employer-sponsored plans.

Question 7

Distributions from a retirement plan are not subject to a 10% additional tax in each of the following instances except when

Accepted Answer

Distributions from a retirement plan are generally subject to a 10% additional tax if withdrawn before age 59½. However, there are certain exceptions to this rule, such as when the distribution is used to pay for medical expenses above the 10% AGI threshold, to pay an IRS tax levy on the plan, or in the case of death or disability of the account holder. In option B, the distribution is paid to an employee to be used to pay health insurance premiums, which is also an exception to the 10% additional tax. Option D is incorrect as it is a general rule that applies to all retirement plan distributions made after age 59½, not an exception to the 10% additional tax.

Question 8

Patrick is age 30,single,and has AGI of $101,000.He would like to contribute to a Coverdell Education Savings Account (CESA)for his niece,Eileen.What is the maximum CESA contribution Patrick can make for Eileen in 2017?

Accepted Answer

Patrick is single and his AGI is $101,000, which is within the modified AGI limit for CESA contributions. Therefore, he can make the maximum contribution of $1,200 to Eileen's CESA.

Question 9

Which of the following statements is incorrect?

Accepted Answer

The incorrect statement is D because once the cost of the annuity has been recovered, any remaining payments are fully taxable, not tax-free. The exclusion ratio only applies until the cost basis is recovered; after that, payments are considered income and taxed accordingly.

Question 10

Paulette is age 32,single,and reported AGI of $68,000 in tax year 2017.She is an active participant in her employer's pension plan.What amount of deductible IRA contribution is disallowed in 2017?

Accepted Answer

For 2017, the phase-out range for a single active participant in an employer's plan is $62,000 to $72,000. Paulette's AGI of $68,000 falls within this range, allowing her a partial deduction. The deductible amount is reduced by $3,300, making this the disallowed portion.

Question 11

DJ is age 27,single,and reported AGI of $70,000 in tax year 2017.He is an active participant in his employer's pension plan.What is the maximum deductible IRA contribution he can make in 2017?

Accepted Answer

The answer of DJ is age 27,single,and reported AGI of...

Question 12

Which of the following statements is incorrect?

Accepted Answer

Retirement plans can be funded with either pre-tax or after-tax contributions, depending on the type of plan. For example, Roth IRAs and Roth 401(k)s are funded with after-tax contributions, and withdrawals from these accounts can be tax-free if certain conditions are met. This makes statement D incorrect as it does not account for these types of retirement plans.

Question 13

Puri is a self-employed Spanish teacher.Her earnings from self-employment before the Keogh deduction but after deducting half of the self-employment tax are $120,000.What is her maximum deductible Keogh contribution for 2017?

Accepted Answer

For 2017, the maximum deductible contribution to a Keogh plan is 20% of net earnings from self-employment. After deducting half of the self-employment tax, Puri's net earnings are $120,000, so 20% of that is $24,000.

Question 14

Mark is single and must start taking distributions from his traditional IRA beginning April 1,2017.At the end of 2016 when Mark was 71 years old,the IRA had a balance of $110,000.What amount must Mark take as a distribution from the IRA by April 1,2017?

Accepted Answer

The required minimum distribution (RMD) for 2017 is calculated by dividing the account balance at the end of the previous year ($110,000) by the life expectancy factor for someone who is 71 years old (26.5). Therefore, the RMD for 2017 is $110,000 / 26.5 = $4,151.

Question 15

Employees age 50 or over can contribute an additional ________ per year to a 401(k)plan for 2017.

Accepted Answer

The answer of Employees age 50 or over can contribute...

Question 16

Which of the following statements regarding Individual Retirement Accounts (IRA)is incorrect?

Accepted Answer

A non-working spouse can contribute to an IRA through a spousal IRA, provided the other spouse has sufficient earned income. This allows the non-working spouse to have an IRA in their name, despite not having earned income themselves.

Question 17

To calculate the taxable portion of an annuity payment,a taxpayer must determine all of the following except:

Accepted Answer

The year in which annuity payments were first received is not directly used to calculate the taxable portion of an annuity payment. The calculation involves the cost of the annuity contract, the expected return, and the amount and frequency of the annuity payments to determine the exclusion ratio and taxable amount.

Question 18

Maurice is age 44,single,and reported AGI of $68,000 in tax year 2017.He is an active participant in his employer's pension plan.What is the maximum deductible IRA contribution he can make in 2017?

Accepted Answer

The answer of Maurice is age 44,single,and reported AGI of...

Question 19

In 2017,a 48-year-old participant in a 401(k)plan may contribute a maximum of:

Accepted Answer

The maximum contribution limit for a 401(k) plan in 2017 for individuals who are 48 years old or younger is $18,000. Therefore, the best choice is option C.

Question 20

Which of the following statements is incorrect?

Accepted Answer

Roth IRA distributions may be tax-free if they meet certain requirements, but this is not always the case. For example, if the account holder has not met the five-year holding requirement or is under age 59½, there may be tax and penalty consequences for early withdrawals.

Quiz 11: Retirement and Other Tax-Deferred Plans and Annuities

At the end of 2015,Erin was 73 years old and her traditional IRA had a balance of $200,000.She properly withdrew $8,403 from her IRA in 2016.In 2016,her IRA assets earned $25,000.What amount must Erin take as a distribution from her IRA in 2017?

Which of the following statements regarding a Coverdell Education Savings Account (CESA) is correct?

Which of the following statements is incorrect?

Gwen is age 51,married,and reported AGI of $102,000 in tax year 2017.She is an active participant in her employer's pension plan.What amount of deductible IRA contribution is disallowed in 2017?

Chandelle and Treymane are married and have combined AGI of $215,000.They would like to contribute to a Coverdell Education Savings Account for their grandson.What is the maximum contribution they can make in 2017?

All of the following are employer-sponsored plans except:

Distributions from a retirement plan are not subject to a 10% additional tax in each of the following instances except when

Patrick is age 30,single,and has AGI of $101,000.He would like to contribute to a Coverdell Education Savings Account (CESA) for his niece,Eileen.What is the maximum CESA contribution Patrick can make for Eileen in 2017?

Which of the following statements is incorrect?

Paulette is age 32,single,and reported AGI of $68,000 in tax year 2017.She is an active participant in her employer's pension plan.What amount of deductible IRA contribution is disallowed in 2017?

DJ is age 27,single,and reported AGI of $70,000 in tax year 2017.He is an active participant in his employer's pension plan.What is the maximum deductible IRA contribution he can make in 2017?

Which of the following statements is incorrect?

Puri is a self-employed Spanish teacher.Her earnings from self-employment before the Keogh deduction but after deducting half of the self-employment tax are $120,000.What is her maximum deductible Keogh contribution for 2017?

Mark is single and must start taking distributions from his traditional IRA beginning April 1,2017.At the end of 2016 when Mark was 71 years old,the IRA had a balance of $110,000.What amount must Mark take as a distribution from the IRA by April 1,2017?

Employees age 50 or over can contribute an additional ________ per year to a 401(k) plan for 2017.

Which of the following statements regarding Individual Retirement Accounts (IRA) is incorrect?

To calculate the taxable portion of an annuity payment,a taxpayer must determine all of the following except:

Maurice is age 44,single,and reported AGI of $68,000 in tax year 2017.He is an active participant in his employer's pension plan.What is the maximum deductible IRA contribution he can make in 2017?

In 2017,a 48-year-old participant in a 401(k) plan may contribute a maximum of:

Which of the following statements is incorrect?