Question 1

For all annuity contracts,to determine the expected return,use the IRS tables for either a single life or a dual life annuity.

Accepted Answer

The expected return on an annuity contract cannot be determined solely by using IRS tables. Other factors such as the annuity's length, interest rates, and fees must also be considered.

Question 2

Generally,tax-deferred retirement plans are not required to make distributions to beneficiaries.

Accepted Answer

Tax-deferred retirement plans, such as traditional IRAs and 401(k)s, are required to make distributions to beneficiaries after the account holder's death. The rules for distributions vary depending on the type of plan and the relationship between the account holder and the beneficiary.

Question 3

A distribution from a retirement plan is conceptually similar to a withdrawal from a savings account.

Accepted Answer

Both a distribution from a retirement plan and a withdrawal from a savings account involve taking money out of a retirement or savings account, respectively.

Question 4

For taxpayers under age 50,contributions can be made to a Roth IRA in an amount equal to the lower of $5,500 or 100% of compensation,plus the amount of contributions for the year to other IRAs.

Accepted Answer

The contribution limit for a Roth IRA for taxpayers under age 50 is $6,000 for 2023, or 100% of earned income, whichever is less. The $5,500 limit was for previous years. Contributions to other IRAs count towards this limit, not in addition to it.

Question 5

Annual contributions to a Keogh plan cannot exceed the greater of $52,000 or 100% of compensation.

Accepted Answer

The annual contribution limit for a Keogh plan is the lesser of $66,000 (as of 2023) or 100% of compensation.

Question 6

Distributions from a Coverdell Education Savings Account are tax-free to the beneficiary if they are used for his or her qualified education expenses.

Accepted Answer

Distributions from a Coverdell Education Savings Account are tax-free to the beneficiary if they are used for his or her qualified education expenses, which include tuition, fees, books, supplies, and equipment required for enrollment or attendance at an eligible educational institution.

Question 7

If a taxpayer pays for an annuity contract with after-tax dollars,all payments received under the contract will be tax-free until the original cost is recovered.

Accepted Answer

The answer of If a taxpayer pays for an annuity...

Question 8

Individuals age 50 or older can make greater annual contributions to an IRA.

Accepted Answer

Individuals age 50 or older can make catch-up contributions to their IRAs, allowing them to contribute more than the standard annual limit. For 2021, the catch-up contribution limit is $1,000, in addition to the standard limit of $6,000, for a total contribution limit of $7,000 for individuals age 50 or older.

Question 9

Distributions from a Coverdell Education Savings Account are tax-free to the beneficiary if they are used for his or her qualified education expenses.

Accepted Answer

Distributions from a Coverdell Education Savings Account are tax-free to the beneficiary if they are used for his or her qualified education expenses, including tuition, fees, books, supplies, and room and board for students attending at least half-time. However, if the funds are not used for qualified education expenses, they may be subject to taxes and penalties.

Question 10

Defined-contribution plans establish the amount of retirement benefits an employee will receive in retirement.

Accepted Answer

Defined-contribution plans do not establish the amount of retirement benefits an employee will receive in retirement. Instead, these plans establish the amount of contributions that will be made to the plan, and the ultimate retirement benefit will depend on how these contributions are invested and the performance of those investments.

Question 11

Pension plan distributions are reported to taxpayers on a Form 1099-P.

Accepted Answer

Pension plan distributions are reported to taxpayers on a Form 1099-R, not a Form 1099-P.

Question 12

Individuals who make contributions to a Coverdell Education Savings Account must have AGI of $175,000 or less.

Accepted Answer

The AGI (Adjusted Gross Income) limit for making contributions to a Coverdell Education Savings Account is $110,000 for single filers and $220,000 for those filing jointly, not $175,000.

Question 13

The expected return on an annuity contract that will last for a specified amount of time is determined with reference to the life expectancy tables published by the IRS.

Accepted Answer

The expected return on an annuity contract is primarily determined by the terms of the contract itself, including the amount of the investment, the interest rate, and the payout options chosen, rather than IRS life expectancy tables. Life expectancy tables may be used in calculating certain aspects of annuities, especially when determining the amount of each payment for a life annuity, but they are not the direct basis for determining the expected return.

Question 14

Roth IRA withdrawals are deemed to first come from contributions followed by earnings.

Accepted Answer

This is true. Roth IRA withdrawals are considered to come first from contributions, which are made with after-tax funds and are not subject to taxes or penalties upon withdrawal. After all contributions have been withdrawn, any earnings in the account can be withdrawn and may be subject to taxes and penalties if withdrawn before age 59.5 or under certain circumstances.

Question 15

SIMPLE and SEP plans are subject to the same nondiscrimination rules that apply to other retirement plans.

Accepted Answer

SIMPLE and SEP plans are not subject to the same rigorous nondiscrimination tests that apply to qualified plans like 401(k)s. They have simpler rules designed for smaller businesses.

Question 16

The proportion of an annuity payment from a qualified pension plan that is determined to have come from employee contributions is taxed at ordinary income rates.

Accepted Answer

The answer of The proportion of an annuity payment from...

Question 17

Tax-deferred plans are only available for purposes of saving for retirement.

Accepted Answer

Tax-deferred plans, such as 401(k)s and IRAs, are primarily used for saving for retirement but they can also be used for other purposes, such as education expenses or the purchase of a first home. However, early withdrawals may result in penalties and taxes.

Question 18

To calculate the taxable amount of an annuity payment,the taxpayer must determine the expected return under the contract.

Accepted Answer

To calculate the taxable amount of an annuity payment, the taxpayer must determine the expected return under the contract. This involves dividing the investment in the contract by the expected return to determine the exclusion ratio, which is then multiplied by the annuity payment to determine the taxable portion.

Question 19

Individuals who are active participants in an employer-sponsored retirement plan may make a deductible contribution to a traditional IRA in certain circumstances.

Accepted Answer

According to IRS rules, individuals who participate in an employer-sponsored retirement plan may still make a deductible contribution to a traditional IRA if their income falls within certain limits. However, if their income exceeds these limits, their contribution may be partially or fully non-deductible.

Question 20

A stream of payments can be called an annuity.

Accepted Answer

An annuity is a stream of payments made at regular intervals, typically monthly or annually, for a specified period of time or until a certain event occurs, such as the death of the recipient.

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

For all annuity contracts,to determine the expected return,use the IRS tables for either a single life or a dual life annuity.

Generally,tax-deferred retirement plans are not required to make distributions to beneficiaries.

A distribution from a retirement plan is conceptually similar to a withdrawal from a savings account.

For taxpayers under age 50,contributions can be made to a Roth IRA in an amount equal to the lower of $5,500 or 100% of compensation,plus the amount of contributions for the year to other IRAs.

Annual contributions to a Keogh plan cannot exceed the greater of $52,000 or 100% of compensation.

Distributions from a Coverdell Education Savings Account are tax-free to the beneficiary if they are used for his or her qualified education expenses.

If a taxpayer pays for an annuity contract with after-tax dollars,all payments received under the contract will be tax-free until the original cost is recovered.

Individuals age 50 or older can make greater annual contributions to an IRA.

Distributions from a Coverdell Education Savings Account are tax-free to the beneficiary if they are used for his or her qualified education expenses.

Defined-contribution plans establish the amount of retirement benefits an employee will receive in retirement.

Pension plan distributions are reported to taxpayers on a Form 1099-P.

Individuals who make contributions to a Coverdell Education Savings Account must have AGI of $175,000 or less.

The expected return on an annuity contract that will last for a specified amount of time is determined with reference to the life expectancy tables published by the IRS.

Roth IRA withdrawals are deemed to first come from contributions followed by earnings.

SIMPLE and SEP plans are subject to the same nondiscrimination rules that apply to other retirement plans.

The proportion of an annuity payment from a qualified pension plan that is determined to have come from employee contributions is taxed at ordinary income rates.

Tax-deferred plans are only available for purposes of saving for retirement.

To calculate the taxable amount of an annuity payment,the taxpayer must determine the expected return under the contract.

Individuals who are active participants in an employer-sponsored retirement plan may make a deductible contribution to a traditional IRA in certain circumstances.

A stream of payments can be called an annuity.