Question 1

High-income taxpayers are not allowed to receive the saver's credit.

Accepted Answer

A) True 
 B)False

Question 2

Dean has earned $70,000 annually for the past 4½ years working as an architect for MWC.Under MWC's defined benefit plan (which uses a 5-year cliff vesting schedule)employees earn a benefit equal to 3.5% of the average of their three highest annual salaries for every full year of service with MWC.What is Dean's vested benefit (or annual benefit he has earned so far)?

Accepted Answer

A)  $12,250. 
B)  $42,000. 
C)  $7,350. 
D)  $0. 
A)  $12,250. 
B)  $42,000. 
C)  $7,350. 
D)  $0.

Question 3

Participating in an employer-sponsored nonqualified deferred compensation plan is potentially risky because employers are not required to fund nonqualified plans.If the employer is not able to pay the employee when the payment is due,the employee usually becomes an unsecured creditor of the employer.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following statements concerning nonqualified deferred compensation plans is true?

Accepted Answer

A)  If an employer doesn't have the funds to pay the employee, the employee becomes an unsecured creditor of the employer. 
B)  These plans can be an important tax planning tool for employers if they expect their marginal tax rate to decrease over time. 
C)  These plans can be an important tax planning tool for employees who expect their marginal tax rate to increase over time. 
D)  Distributions are taxed at the same tax rate as long-term capital gains. 
A)  If an employer doesn't have the funds to pay the employee, the employee becomes an unsecured creditor of the employer. 
B)  These plans can be an important tax planning tool for employers if they expect their marginal tax rate to decrease over time. 
C)  These plans can be an important tax planning tool for employees who expect their marginal tax rate to increase over time. 
D)  Distributions are taxed at the same tax rate as long-term capital gains.

Question 5

Kathy is 60 years of age and self-employed.During 2017,she reported $500,000 of revenues and $100,000 of expenses relating to her self-employment activities.If Kathy has no other retirement accounts in her name,what is the maximum amount she can contribute to an individual 401(k)for 2017? (Round your final answer to the nearest whole number)

Accepted Answer

A)  $54,000. 
B)  $60,000. 
C)  $95,351. 
D)  $77,351. 
A)  $54,000. 
B)  $60,000. 
C)  $95,351. 
D)  $77,351.

Question 6

In 2017,Tyson (age 22)earned $3,500 from his part-time job and he reported $15,000 of interest income (unearned income).Assuming he does not participate in an employer-sponsored plan,what is the maximum deductible IRA contribution Tyson can make in 2017?

Accepted Answer

$3,500
Deductible co

Question 7

Heidi,age 45,has contributed $20,000 in total to her Roth 401(k)account over a six-year period.When her account was worth $50,000 and Heidi was in desperate need of cash,Heidi received a $30,000 nonqualified distribution from the account.How much of the distribution will be subject to income tax and 10% penalty?

Accepted Answer

A)  $0. 
B)  $10,000. 
C)  $12,000. 
D)  $18,000. 
E)  $30,000. 
A)  $0. 
B)  $10,000. 
C)  $12,000. 
D)  $18,000. 
E)  $30,000.

Question 8

On December 1,2017 Irene turned 71 years old.She is still working for her employer and she participates in her employer's 401(k)plan.Irene is not required to receive a minimum distribution for 2017 from her 401(k)account because she has not yet retired.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following taxpayers is most likely to qualify for the saver's credit?

Accepted Answer

A)  A low AGI taxpayer who does not contribute to any qualified retirement plan. 
B)  A low AGI taxpayer who contributes to her employer's 401(k) plan. 
C)  A high AGI self-employed taxpayer. 
D)  A high AGI employee who does not contribute to any qualified retirement plan. 
A)  A low AGI taxpayer who does not contribute to any qualified retirement plan. 
B)  A low AGI taxpayer who contributes to her employer's 401(k) plan. 
C)  A high AGI self-employed taxpayer. 
D)  A high AGI employee who does not contribute to any qualified retirement plan.

Question 10

When a taxpayer receives a nonqualified distribution from a Roth 401(k)account the taxpayer contributions are deemed to be distributed first.If the amount of the distribution exceeds the taxpayer contributions,the remainder is from the account earnings.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following statements regarding IRAs is false?

Accepted Answer

A)  Taxpayers who participate in an employer-sponsored retirement plan may be allowed to make deductible contributions to a traditional IRA. 
B)  The ability to make deductible contributions to a traditional IRA and nondeductible contributions to a Roth IRA may be subject to phase-out based on AGI. 
C)  A taxpayer may contribute to a traditional IRA in 2017 but deduct the contribution on her 2016 tax return. 
D)  Taxpayers who have made nondeductible contributions to a traditional IRA are taxed on the full proceeds when they receive distributions from the IRA. 
A)  Taxpayers who participate in an employer-sponsored retirement plan may be allowed to make deductible contributions to a traditional IRA. 
B)  The ability to make deductible contributions to a traditional IRA and nondeductible contributions to a Roth IRA may be subject to phase-out based on AGI. 
C)  A taxpayer may contribute to a traditional IRA in 2017 but deduct the contribution on her 2016 tax return. 
D)  Taxpayers who have made nondeductible contributions to a traditional IRA are taxed on the full proceeds when they receive distributions from the IRA.

Question 12

Yvette is a 44-year-old self-employed contractor (no employees).During 2017,her Schedule C net income was 500,000.Assuming Yvette has no contributions to other retirement plans.What is the maximum amount that Yvette can contribute to (1)a SEP IRA and (2)an individual 401(k)? (Round your answers to the nearest whole number).

Accepted Answer

SEP IRA = $54,000; Individual 401(k)= $5

Question 13

An employer may contribute to an employee's traditional 401(k)account but the employer may not contribute to an employee's Roth 401(k)account.

Accepted Answer

A) True 
 B)False

Question 14

Retired taxpayers over 59½ years of age at the end of the year must receive minimum distributions from defined contribution plans or they are subject to a penalty.

Accepted Answer

A) True 
 B)False

Question 15

On March 30,Rodger (age 56)was laid off from his employer of 30 years due to rough economic times.During his 30 years of employment,Rodger contributed $300,000 to his traditional 401(k)account.When Rodger was let go,his 401(k)account balance was $900,000 (this included both employer matching and account earnings).Rodger immediately withdrew $40,000 to use as an emergency savings fund.What amount of tax and early distribution penalties must Rodger pay on the $40,000 withdrawal if his ordinary marginal tax rate is 28 percent?

Accepted Answer

Tax is $11,200 ($40,000 × 28%)

Question 16

Which of the following is true concerning SEP IRAs?

Accepted Answer

A)  SEP IRAs are difficult to set up and have high administrative costs. 
B)  Taxpayers may contribute unlimited amounts to SEP IRAs. 
C)  Employees of the taxpayer cannot be included in SEP IRAs. 
D)  Taxpayers with a SEP IRA must contribute for their employees. 
A)  SEP IRAs are difficult to set up and have high administrative costs. 
B)  Taxpayers may contribute unlimited amounts to SEP IRAs. 
C)  Employees of the taxpayer cannot be included in SEP IRAs. 
D)  Taxpayers with a SEP IRA must contribute for their employees.

Question 17

Employers may choose whom they allow to participate and whom they do not allow to participate in their nonqualified deferred compensation plans.

Accepted Answer

A) True 
 B)False

Question 18

Amy is single.During 2017,she determined her adjusted gross income was $12,000.During the year,Amy also contributed $1,500 to a Roth IRA.What is the maximum saver's credit she may claim for the year?

Accepted Answer

A)  $750. 
B)  $1,000. 
C)  $1,500. 
D)  $0. 
A)  $750. 
B)  $1,000. 
C)  $1,500. 
D)  $0.

Question 19

During 2017,Jacob,a 19 year old full-time student,earned $4,500 during the year and was not eligible to participate in an employer-sponsored retirement plan.The general limit for deductible contributions to an IRA during 2017 is $5,500.How much of a tax-deductible contribution can Jacob make to an IRA?

Accepted Answer

A)  $0 (Full-time students are not allowed to participate in IRAs). 
B)  $500. 
C)  $4,500. 
D)  $5,500. 
A)  $0 (Full-time students are not allowed to participate in IRAs). 
B)  $500. 
C)  $4,500. 
D)  $5,500.

Question 20

Which of the following is not a self-employed retirement account?

Accepted Answer

A)  SEP IRA. 
B)  SEM 403(c). 
C)  Individual 401(k). 
D)  None of the choices are correct. All of the choices are self-employed retirement accounts. 
A)  SEP IRA. 
B)  SEM 403(c). 
C)  Individual 401(k). 
D)  None of the choices are correct. All of the choices are self-employed retirement accounts.

High-income taxpayers are not allowed to receive the saver's credit.

Which of the following statements concerning nonqualified deferred compensation plans is true?

In 2017,Tyson (age 22)earned $3,500 from his part-time job and he reported $15,000 of interest income (unearned income).Assuming he does not participate in an employer-sponsored plan,what is the maximum deductible IRA contribution Tyson can make in 2017?

On December 1,2017 Irene turned 71 years old.She is still working for her employer and she participates in her employer's 401(k)plan.Irene is not required to receive a minimum distribution for 2017 from her 401(k)account because she has not yet retired.

Which of the following taxpayers is most likely to qualify for the saver's credit?

When a taxpayer receives a nonqualified distribution from a Roth 401(k)account the taxpayer contributions are deemed to be distributed first.If the amount of the distribution exceeds the taxpayer contributions,the remainder is from the account earnings.

Which of the following statements regarding IRAs is false?

An employer may contribute to an employee's traditional 401(k)account but the employer may not contribute to an employee's Roth 401(k)account.

Retired taxpayers over 59½ years of age at the end of the year must receive minimum distributions from defined contribution plans or they are subject to a penalty.

Which of the following is true concerning SEP IRAs?

Employers may choose whom they allow to participate and whom they do not allow to participate in their nonqualified deferred compensation plans.

Amy is single.During 2017,she determined her adjusted gross income was $12,000.During the year,Amy also contributed $1,500 to a Roth IRA.What is the maximum saver's credit she may claim for the year?

Which of the following is not a self-employed retirement account?

An Introduction to Tax

Tax Compliance, The IRS and Tax Authorities

Tax Planning Strategies and Related Limitations

Individual Income Tax Overview, Exemptions, and Filing Status

Gross Income and Exclusions

Individual Deductions

Investments

Individual Income Tax Computation and Tax Credits

Business Income, Deductions, and Accounting Methods

Property Acquisition and Cost Recovery

Property Dispositions

Compensation

Tax Consequences of Home Ownership

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Exam 13: Retirement Savings and Deferred Compensation

High-income taxpayers are not allowed to receive the saver's credit.

Which of the following statements concerning nonqualified deferred compensation plans is true?

In 2017,Tyson (age 22)earned $3,500 from his part-time job and he reported $15,000 of interest income (unearned income).Assuming he does not participate in an employer-sponsored plan,what is the maximum deductible IRA contribution Tyson can make in 2017?

On December 1,2017 Irene turned 71 years old.She is still working for her employer and she participates in her employer's 401(k)plan.Irene is not required to receive a minimum distribution for 2017 from her 401(k)account because she has not yet retired.

Which of the following taxpayers is most likely to qualify for the saver's credit?

When a taxpayer receives a nonqualified distribution from a Roth 401(k)account the taxpayer contributions are deemed to be distributed first.If the amount of the distribution exceeds the taxpayer contributions,the remainder is from the account earnings.

Which of the following statements regarding IRAs is false?

An employer may contribute to an employee's traditional 401(k)account but the employer may not contribute to an employee's Roth 401(k)account.

Retired taxpayers over 59½ years of age at the end of the year must receive minimum distributions from defined contribution plans or they are subject to a penalty.

Which of the following is true concerning SEP IRAs?

Employers may choose whom they allow to participate and whom they do not allow to participate in their nonqualified deferred compensation plans.

Amy is single.During 2017,she determined her adjusted gross income was $12,000.During the year,Amy also contributed $1,500 to a Roth IRA.What is the maximum saver's credit she may claim for the year?

Which of the following is not a self-employed retirement account?

An Introduction to Tax

Tax Compliance, The IRS and Tax Authorities

Tax Planning Strategies and Related Limitations

Individual Income Tax Overview, Exemptions, and Filing Status

Gross Income and Exclusions

Individual Deductions

Investments

Individual Income Tax Computation and Tax Credits

Business Income, Deductions, and Accounting Methods

Property Acquisition and Cost Recovery

Property Dispositions

Compensation

Tax Consequences of Home Ownership

Filters