Question 1

Which of the following statements is incorrect?

Accepted Answer

Contributions to a pension plan can be made by both the beneficiary and the employer.

Question 2

Pension plans must meet complex rules to retain their tax-advantaged status.These rules include all of the following except:

Accepted Answer

The correct statement is that contributions must fully vest within 3 years, not 5 years. Therefore, option D is the exception to the rules that pension plans must meet to retain their tax-advantaged status.

Question 3

Len is entitled to receive monthly payments of $1,500 over his life from his employer's qualified pension plan.The payments begin January 1,2016.He contributed $71,500 to the plan prior to his retirement at age 62.Using the simplified method,how much of the payments will be included in Len's taxable income for 2016?

Accepted Answer

Under the simplified method, Len's total contributions of $71,500 are spread over his expected number of payments based on his age at retirement. At age 62, the IRS provides a factor of 260. Thus, $71,500 / 260 = $275 per month is considered a return of his own contributions and is not taxable. Therefore, $1,500 - $275 = $1,225 of each monthly payment is taxable. For 12 months, $1,225 x 12 = $14,700 is included in his taxable income for 2016.

Question 4

Jill is single,age 27,and reported AGI of $62,000 in tax year 2016.She is an active participant in her employer's pension plan.What is the maximum deductible Roth IRA contribution she can make in 2016?

Accepted Answer

Since Jill is an active participant in her employer's pension plan and her AGI is above $61,000, she is not eligible to make a deductible contribution to a traditional IRA. Therefore, she is also not eligible for a deductible Roth IRA contribution.

Question 5

Which of the following is true regarding an SEP?

Accepted Answer

An SEP (Simplified Employee Pension) plan cannot discriminate in favor of highly compensated employees, ensuring fair treatment of all employees in terms of contributions.

Question 6

Kaysia participates in a SIMPLE plan provided by her employer.In 2016,she contributes 6% of her $50,000 salary,and her employer contributes 3% to the plan.What amount of the contributions will be vested in her account at the end of 2016?

Accepted Answer

In a SIMPLE plan, employee contributions are always 100% vested. Kaysia contributes 6% of her $50,000 salary, which is $3,000. Her employer contributes 3%, which is $1,500. The total vested amount is $3,000 + $1,500 = $4,500.

Question 7

Valerie and Marty are both age 51 and file a joint return.They have one child who is age 17.They have combined AGI in 2016 of $180,000.What is their maximum permitted contribution to a Coverdell Education Savings Account for 2016 assuming no other persons make contributions?

Accepted Answer

The answer of Valerie and Marty are both age 51...

Question 8

In order to obtain and retain qualified status,a pension or profit-sharing plan must not discriminate in favor of highly compensated employees which include:

Accepted Answer

Highly compensated employees include those who own more than 5% of the corporation's stock, regardless of their compensation level.

Question 9

Benjamin and Ester file a joint return and have AGI of $165,000.Both are active participants in their employer's pension plan.They have one child,Emily,who is age 8.Emily's grandparents contributed $1,000 to a Coverdell Education Savings Account for Emily in 2016.What is the maximum permitted Coverdell Education Savings Account contribution that Benjamin and Ester can make in 2016?

Accepted Answer

The answer of Benjamin and Ester file a joint return...

Question 10

Which of the following statements is incorrect?

Accepted Answer

Contributions to a pension plan that have not been taxed will result in taxable distributions when withdrawn.

Question 11

Xavier is a self-employed plumber.His earnings from self-employment,before the Keogh deduction but after deducting half of the self-employment tax,are $80,000.What is his deductible Keogh contribution for 2016?

Accepted Answer

The answer of Xavier is a self-employed plumber.His earnings from...

Question 12

What are some tax consequences related to a qualified pension plan?

Accepted Answer

Employer contributions to a qualified pension plan are deductible when made, and employees are not taxed until distributions are received from the plan. However, earnings on the contributions are not taxable to the employee until they withdraw them from the plan. This tax deferral on contributions and earnings make qualified pension plans attractive retirement savings vehicles.

Question 13

Escobar and Rose are both age 36 and file a joint return.Neither is covered under an employer plan.Escobar earned $121,000 of compensation in 2016.Rose worked part-time and earned $1,200.What is the maximum deductible IRA contribution they can make in 2016?

Accepted Answer

Since neither Escobar nor Rose is covered by an employer plan, they can each contribute up to the maximum IRA limit for 2016, which is $5,500 per person. Therefore, together they can contribute a total of $11,000.

Question 14

Omar is single,age 46,and reported AGI of $124,000 in tax year 2016.He is an active participant in his employer's pension plan.What is the maximum Roth IRA contribution he can make in 2016?

Accepted Answer

Since Omar is an active participant in his employer's pension plan, his contribution limit for a traditional IRA is reduced based on his income level. According to the IRS, in 2016, single filers with AGI between $118,000 and $133,000 can only contribute a reduced amount to a traditional IRA, and no longer qualify for a Roth IRA contribution. The reduced amount for Omar is calculated as follows: 
- Subtract the income threshold for reduced contributions ($118,000) from Omar's AGI: $124,000 - $118,000 = $6,000. 
- Divide the result by the income range for reduced contributions ($15,000): $6,000 / $15,000 = 0.4 
- Multiply the maximum yearly contribution limit ($5,500) by the decimal just calculated: $5,500 x 0.4 = $2,200 
Therefore, the maximum Roth IRA contribution Omar can make in 2016 is $2,933 (i.e. $5,500 - $2,200).

Question 15

Which of the following statements is correct?

Accepted Answer

All the statements are correct: pension plans are typically established with a trustee, retirement plans are usually tax-deferred rather than tax-free, and Congress set rules to encourage retirement savings.

Question 16

In 2016,a 52-year-old participant in a 401k)plan may contribute a maximum of:

Accepted Answer

In 2016, the maximum contribution limit for a 401(k) plan was $18,000, with an additional catch-up contribution of $6,000 allowed for participants aged 50 and over, totaling $24,000.

Question 17

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

Accepted Answer

A person can contribute to multiple CESAs during each tax year as long as the total contributions do not exceed the yearly limit.

Question 18

Venkat is age 32,single,and reported AGI of $67,000 in tax year 2016.He is an active participant in his employer's pension plan.What is the maximum deductible IRA contribution he can make in 2016?

Accepted Answer

For 2016, the IRA deduction limit phases out for single filers who are active participants in an employer's plan with AGI between $61,000 and $71,000. Venkat's AGI of $67,000 falls within this range, so his maximum deductible contribution is reduced to $2,200.

Question 19

Charlotte is age 52,married,and reported AGI of $102,000 in tax year 2016.She is an active participant in her employer's pension plan.What is the disallowed portion of her deductible IRA contribution in 2016?

Accepted Answer

The answer of Charlotte is age 52,married,and reported AGI of...

Question 20

Which of the following statements is incorrect?

Accepted Answer

Profit-sharing plans can qualify as pension plans and are a type of defined-contribution plan. The amount of profit sharing can be determined in advance and can be based on a percentage of company profits or predetermined formulas. Therefore, statement B is incorrect.

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

Which of the following statements is incorrect?

Pension plans must meet complex rules to retain their tax-advantaged status.These rules include all of the following except:

Jill is single,age 27,and reported AGI of $62,000 in tax year 2016.She is an active participant in her employer's pension plan.What is the maximum deductible Roth IRA contribution she can make in 2016?

Which of the following is true regarding an SEP?

Kaysia participates in a SIMPLE plan provided by her employer.In 2016,she contributes 6% of her $50,000 salary,and her employer contributes 3% to the plan.What amount of the contributions will be vested in her account at the end of 2016?

Valerie and Marty are both age 51 and file a joint return.They have one child who is age 17.They have combined AGI in 2016 of $180,000.What is their maximum permitted contribution to a Coverdell Education Savings Account for 2016 assuming no other persons make contributions?

In order to obtain and retain qualified status,a pension or profit-sharing plan must not discriminate in favor of highly compensated employees which include:

Which of the following statements is incorrect?

Xavier is a self-employed plumber.His earnings from self-employment,before the Keogh deduction but after deducting half of the self-employment tax,are $80,000.What is his deductible Keogh contribution for 2016?

What are some tax consequences related to a qualified pension plan?

Escobar and Rose are both age 36 and file a joint return.Neither is covered under an employer plan.Escobar earned $121,000 of compensation in 2016.Rose worked part-time and earned $1,200.What is the maximum deductible IRA contribution they can make in 2016?

Omar is single,age 46,and reported AGI of $124,000 in tax year 2016.He is an active participant in his employer's pension plan.What is the maximum Roth IRA contribution he can make in 2016?

Which of the following statements is correct?

In 2016,a 52-year-old participant in a 401k) plan may contribute a maximum of:

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

Venkat is age 32,single,and reported AGI of $67,000 in tax year 2016.He is an active participant in his employer's pension plan.What is the maximum deductible IRA contribution he can make in 2016?

Charlotte is age 52,married,and reported AGI of $102,000 in tax year 2016.She is an active participant in her employer's pension plan.What is the disallowed portion of her deductible IRA contribution in 2016?

Which of the following statements is incorrect?