Question 1

Which of the following statements is incorrect?

Accepted Answer

Roth IRA distributions may become taxable if they do not meet certain requirements, such as the account being open for at least five years and the distribution being made after the account holder reaches age 59½. Therefore, statement A is incorrect. The other statements are correct.

Question 2

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 3

Paulette is age 32,single,and reported AGI of $66,000 in tax year 2014.She is an active participant in her employer's pension plan.What amount of deductible IRA contribution is disallowed in 2014?

Accepted Answer

For a single taxpayer who is an active participant in an employer-sponsored retirement plan like Paulette, the phase-out range for deductibility of traditional IRA contributions in 2014 is between $60,000 and $70,000. Since Paulette's AGI of $66,000 falls within this range, the amount of her deductible IRA contribution is reduced by the phase-out percentage of 50%. Therefore, the amount of her deductible IRA contribution disallowed is $3,300 (50% of the maximum contribution limit for individuals under age 50, which was $5,500 in 2014).

Question 4

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 5

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

Accepted Answer

The answer of Which of the following statements regarding a...

Question 6

DJ is age 27,single,and reported AGI of $68,000 in tax year 2014.He is an active participant in his employer's pension plan.What is the maximum deductible IRA contribution he can make in 2014?

Accepted Answer

In 2014, the IRA deduction limit for a single filer who is an active participant in an employer's pension plan begins to phase out at an AGI of $60,000 and is completely phased out at $70,000. DJ's AGI of $68,000 falls within this phase-out range, reducing his maximum deductible contribution.

Question 7

All of the following are employer-sponsored plans except:

Accepted Answer

The Coverdell Education Savings Account is not an employer-sponsored plan, but rather an education savings account that can be established by an individual or parent/guardian for an eligible student. The other options (B, C, and D) are all types of employer-sponsored plans.

Question 8

At the end of 2012,Erin was 73 years old and her traditional IRA had a balance of $200,000.She properly withdrew $8,403 from her IRA in 2013.In 2013,her IRA assets earned $25,000.What amount must Erin take as a distribution from her IRA in 2014?

Accepted Answer

To calculate the required minimum distribution (RMD) for 2014, we need to first find the IRA balance as of December 31, 2013.
IRA balance as of December 31, 2013 = $200,000 + $25,000 (earnings) - $8,403 (withdrawal) = $216,597
Next, we use the IRS Uniform Lifetime Table to find the distribution period for someone who was 74 years old at the end of 2013, which is 22.9.
RMD for 2014 = IRA balance as of December 31, 2013 / distribution period = $216,597 / 22.9 = $9,458.03, which rounds to $9,458.

Therefore, the best choice is B) $9,458 with the given explanation.

Question 9

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 2014?

Accepted Answer

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

Question 10

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 11

In 2014,a 48-year-old participant in a 401(k)plan may contribute a maximum of:

Accepted Answer

In 2014, the maximum contribution limit for a 401(k) plan was $17,500 for individuals under 50.

Question 12

Gwen is age 51,married,and reported AGI of $99,000 in tax year 2014.She is an active participant in her employer's pension plan.What amount of deductible IRA contribution is disallowed in 2014?

Accepted Answer

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

Question 13

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

Accepted Answer

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

Question 14

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 2014?

Accepted Answer

Patrick's AGI is $101,000, which is within the modified AGI limit for CESA contributions. The maximum contribution for 2014 is $2,000, but since Patrick is single, his maximum contribution is reduced to $1,200.

Question 15

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 16

Mark is single and must start making distributions from his traditional IRA beginning April 1,2014.At the end of 2013 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 1,2014?

Accepted Answer

To calculate the Required Minimum Distribution (RMD) for Mark, we need to use the Uniform Lifetime Table provided by the IRS. At 71 years old, Mark's distribution period is 26.5 years.

To calculate the RMD, we divide the IRA balance at the end of the previous year (2013) by the distribution period:

RMD = IRA balance at end of previous year / distribution period

RMD = $110,000 / 26.5 = $4,150.94

Since the IRS requires RMDs to be rounded to the nearest dollar, Mark must take a distribution of $4,151 by April 1, 2014.

Therefore, the best choice is A) $4,151.

Question 17

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 deductible Keogh contribution for 2014?

Accepted Answer

The deductible Keogh contribution is 20% of net earnings from self-employment, which is $120,000 * 20% = $24,000.

Question 18

Maurice is age 44,single,and reported AGI of $68,000 in tax year 2014.He is an active participant in his employer's pension plan.What is the maximum deductible IRA contribution he can make in 2014?

Accepted Answer

In 2014, the phase-out range for deductible IRA contributions for single filers who are active participants in an employer's pension plan was $60,000 to $70,000. Maurice's AGI of $68,000 falls within this range, reducing his maximum deductible contribution.

Question 19

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 20

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 not subject to a 10% additional tax if they are made to an employee to be used to pay health insurance premiums. All other options listed (A, C, D) would result in the distribution being subject to the 10% additional tax.

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

Which of the following statements is incorrect?

Which of the following statements is incorrect?

Paulette is age 32,single,and reported AGI of $66,000 in tax year 2014.She is an active participant in her employer's pension plan.What amount of deductible IRA contribution is disallowed in 2014?

Which of the following statements is incorrect?

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

DJ is age 27,single,and reported AGI of $68,000 in tax year 2014.He is an active participant in his employer's pension plan.What is the maximum deductible IRA contribution he can make in 2014?

All of the following are employer-sponsored plans except:

At the end of 2012,Erin was 73 years old and her traditional IRA had a balance of $200,000.She properly withdrew $8,403 from her IRA in 2013.In 2013,her IRA assets earned $25,000.What amount must Erin take as a distribution from her IRA in 2014?

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 2014?

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

In 2014,a 48-year-old participant in a 401(k) plan may contribute a maximum of:

Gwen is age 51,married,and reported AGI of $99,000 in tax year 2014.She is an active participant in her employer's pension plan.What amount of deductible IRA contribution is disallowed in 2014?

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

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 2014?

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

Mark is single and must start making distributions from his traditional IRA beginning April 1,2014.At the end of 2013 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 1,2014?

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 deductible Keogh contribution for 2014?

Maurice is age 44,single,and reported AGI of $68,000 in tax year 2014.He is an active participant in his employer's pension plan.What is the maximum deductible IRA contribution he can make in 2014?

Which of the following statements is incorrect?

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