Question 1

Which of the following statements regarding Roth 401(k) accounts is false?

Accepted Answer

A)  Employees can make contributions to a Roth 401(k). 
B)  Employers can make contributions to Roth accounts on behalf of their employees. 
C)  Contributions to Roth 401(k) plans are not deductible. 
D)  Qualified distributions from Roth 401(k) plans are not taxable. 
A)  Employees can make contributions to a Roth 401(k). 
B)  Employers can make contributions to Roth accounts on behalf of their employees. 
C)  Contributions to Roth 401(k) plans are not deductible. 
D)  Qualified distributions from Roth 401(k) plans are not taxable. B

Question 2

Which of the following describes a defined contribution plan?

Accepted Answer

A)  Provides guaranteed income on retirement to plan participants. 
B)  Employers and employees generally may contribute to the plan. 
C)  Generally set up to defer income for executives and highly compensated employees but not other employees. 
D)  Retirement account set up to provide an individual a fixed amount of income on retirement. 
A)  Provides guaranteed income on retirement to plan participants. 
B)  Employers and employees generally may contribute to the plan. 
C)  Generally set up to defer income for executives and highly compensated employees but not other employees. 
D)  Retirement account set up to provide an individual a fixed amount of income on retirement. B

Question 3

Shauna received a distribution from her 401(k) account this year. In which of the following situations will Shauna be subject to an early distribution penalty?

Accepted Answer

A)  Shauna is 60 years of age but not yet retired when she receives the distribution. 
B)  Shauna is 58 years of age but not yet retired when she receives the distribution. 
C)  Shauna is 56 years of age and retired when she receives the distribution. 
D)  Shauna is 69 years of age but not yet retired when she receives the distribution. 
A)  Shauna is 60 years of age but not yet retired when she receives the distribution. 
B)  Shauna is 58 years of age but not yet retired when she receives the distribution. 
C)  Shauna is 56 years of age and retired when she receives the distribution. 
D)  Shauna is 69 years of age but not yet retired when she receives the distribution. B

Question 4

Kathy is 60 years of age and self-employed. During the year she reported $400,000 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)?

Accepted Answer

A)  $52,000 
B)  $57,500 
C)  $75,246 
D)  $57,746 
A)  $52,000 
B)  $57,500 
C)  $75,246 
D)  $57,746

Question 5

If a taxpayer's marginal tax rate is decreasing, a taxpayer contributing to a traditional IRA can earn an after-tax rate of return greater than her before-tax rate of return.

Accepted Answer

A) True 
 B)False

Question 6

Tatia, age 38, has made deductible contributions to her traditional IRA over the past few years. When her account balance was $30,000, she received a distribution of the entire $30,000 balance of her traditional IRA. She retained $5,000 of the distribution to help her pay the taxes due on the distribution and she immediately contributed the remaining $25,000 to a Roth IRA. What amount of tax and early distribution penalty is she required to pay on the $30,000 distribution from the traditional IRA if her marginal tax rate is 25 percent?

Accepted Answer

$7,500 income tax; $

Question 7

During 2014 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 during 2014 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 8

Scott and his wife Leanne (ages 39 and 37 respectively) earned $50,000 in 2014. Scott was able to contribute $2,400 ($200/month) to his employer sponsored 401(k). What amount of saver's credit can Scott and Leanne claim in 2014?

Accepted Answer

The answer of Scott and his wife Leanne (ages 39...

Question 9

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

Question 10

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

Accepted Answer

A)  Employers are required to invest salary deferred by employees in investments specified by the employees. 
B)  Employers are required to annually fund their deferred compensation obligations to employees. 
C)  Employers annually deduct the amount earned by employees under the plan. 
D)  Employers may discriminate in terms of who they allow to participate in the plan. 
A)  Employers are required to invest salary deferred by employees in investments specified by the employees. 
B)  Employers are required to annually fund their deferred compensation obligations to employees. 
C)  Employers annually deduct the amount earned by employees under the plan. 
D)  Employers may discriminate in terms of who they allow to participate in the plan.

Question 11

Yvette is a 44-year-old self-employed contractor (no employees). During 2014, her Schedule C net income was 400,000. 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)?

Accepted Answer

SEP IRA =

Question 12

Tatia, age 38, has made deductible contributions to her traditional IRA over the past few years. When her account balance was $32,000, she transferred the entire $32,000 out of her traditional IRA and immediately into a Roth IRA. Her current marginal tax rate is 25 percent. What amount of tax and penalty is she required to pay on this rollover?

Accepted Answer

$8,000 tax

Question 13

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 14

Lisa, age 45, needed some cash so she received a $50,000 distribution from her Roth IRA. At the time of the distribution, the balance in the Roth IRA was $200,000. Lisa established the Roth IRA 10 years ago. Over the years, she has contributed $20,000 to her account. What amount of the distribution is taxable and subject to early distribution penalty?

Accepted Answer

A)  $0 
B)  $5,000 
C)  $30,000 
D)  $50,000 
A)  $0 
B)  $5,000 
C)  $30,000 
D)  $50,000

Question 15

Jenny (35 years old) is considering making a one-time contribution to either a traditional 401(k) plan or to a Roth 401(k) plan. She plans to withdraw the account balance when she retires in 40 years. Jenny expects to earn a 7% before-tax rate of return no matter which plan she contributes to. Which of the following statements is true?

Accepted Answer

A)  If Jenny's marginal tax rate in the year of contribution is higher than her marginal tax rate in the year of distribution, she will earn a higher after-tax rate of return on the traditional 401(k) plan than on the Roth 401(k) plan. 
B)  If Jenny's marginal tax rate in the year of contribution is lower than her marginal tax rate in the year of distribution, she will earn a higher after-tax rate of return on the traditional 401(k) plan than on the Roth 401(k) plan. 
C)  Jenny will earn the same after-tax rate of return no matter which plan she contributes to. 
D)  Jenny is not allowed to make a one-time contribution to either plan. 
A)  If Jenny's marginal tax rate in the year of contribution is higher than her marginal tax rate in the year of distribution, she will earn a higher after-tax rate of return on the traditional 401(k) plan than on the Roth 401(k) plan. 
B)  If Jenny's marginal tax rate in the year of contribution is lower than her marginal tax rate in the year of distribution, she will earn a higher after-tax rate of return on the traditional 401(k) plan than on the Roth 401(k) plan. 
C)  Jenny will earn the same after-tax rate of return no matter which plan she contributes to. 
D)  Jenny is not allowed to make a one-time contribution to either plan.

Question 16

Sean (age 74 at end of 2014) retired five years ago. The balance in his 401(k) account on December 31, 2013 was $1,700,000 and the balance in his account on December 31, 2014 was $1,750,000. In 2013, Sean received a distribution of $50,000 from his 401(k) account. Assuming Sean's marginal tax rate is 25 percent, what amount of the $50,000 distribution will Sean have left after paying income tax on the distribution and paying any minimum distribution penalties (use the IRS table below in determining the minimum distribution penalty, if any). $$\begin{array} { | c | c | l | } 
\hline \begin{array} { c } 
\text { Age of } \
\text { Participant }
\end{array} & \begin{array} { c } 
\text { Distribution } \
\text { Period }
\end{array} &{ \begin{array} { c } 
\text { Applicable } \
\text { Percentage }
\end{array} } \
\hline 70 & 27.4 & 3.65 \% \
\hline 71 & 26.5 & 3.77 \% \
\hline 72 & 25.6 & 3.91 \% \
\hline 73 & 24.7 & 4.05 \% \
\hline 74 & 23.8 & 4.20 \% \
\hline 75 & 22.9 & 4.37 \% \
\hline
\end{array}$$

Accepted Answer

$26,800 remaining after taxes

Question 17

Heidi has contributed $20,000 in total to her Roth 401(k) account over a six year period. In 2014, 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 18

Lisa, age 45, needed some cash so she received a $50,000 distribution from her Roth IRA. At the time of the distribution, the balance in the Roth IRA was $200,000. Lisa established the Roth IRA 8 years ago. Through a rollover and annual contributions, she has contributed $80,000 to her account. What amount of the distribution is taxable and subject to early distribution penalty?

Accepted Answer

A)  $0 
B)  $20,000 
C)  $30,000 
D)  $50,000 
A)  $0 
B)  $20,000 
C)  $30,000 
D)  $50,000

Question 19

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 2015 but deduct the contribution in 2014. 
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 2015 but deduct the contribution in 2014. 
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 20

Which of the following statements regarding Roth IRAs distributions is true?

Accepted Answer

A)  A distribution is not a qualifying distribution unless the distribution is at least two years after the taxpayer has opened the Roth IRA. 
B)  A taxpayer receiving a distribution from a Roth IRA before reaching the age of 55 is generally not subject to an early distribution penalty. 
C)  A Roth IRA does not have minimum distribution requirements. 
D)  The full amount of all nonqualifying distributions is subject to tax at the taxpayer's marginal tax rate. 
A)  A distribution is not a qualifying distribution unless the distribution is at least two years after the taxpayer has opened the Roth IRA. 
B)  A taxpayer receiving a distribution from a Roth IRA before reaching the age of 55 is generally not subject to an early distribution penalty. 
C)  A Roth IRA does not have minimum distribution requirements. 
D)  The full amount of all nonqualifying distributions is subject to tax at the taxpayer's marginal tax rate.

Which of the following statements regarding Roth 401(k) accounts is false?

Which of the following describes a defined contribution plan?

Shauna received a distribution from her 401(k) account this year. In which of the following situations will Shauna be subject to an early distribution penalty?

Kathy is 60 years of age and self-employed. During the year she reported $400,000 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)?

If a taxpayer's marginal tax rate is decreasing, a taxpayer contributing to a traditional IRA can earn an after-tax rate of return greater than her before-tax rate of return.

During 2014 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 during 2014 is $5,500. How much of a tax-deductible contribution can Jacob make to an IRA?

Scott and his wife Leanne (ages 39 and 37 respectively) earned $50,000 in 2014. Scott was able to contribute $2,400 ($200/month) to his employer sponsored 401(k). What amount of saver's credit can Scott and Leanne claim in 2014?

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

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

Yvette is a 44-year-old self-employed contractor (no employees). During 2014, her Schedule C net income was 400,000. 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)?

Which of the following statements regarding IRAs is false?

Which of the following statements regarding Roth IRAs distributions is true?

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

Individual Income Tax Computation and Tax Credits

Business Income, Deductions, and Accounting Methods

Property Acquisition and Cost Recovery

Property Dispositions

Investments

Compensation

Tax Consequences of Home Ownership

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Exam 13: Retirement Savings and Deferred Compensation

Which of the following statements regarding Roth 401(k) accounts is false?

Which of the following describes a defined contribution plan?

Shauna received a distribution from her 401(k) account this year. In which of the following situations will Shauna be subject to an early distribution penalty?

Kathy is 60 years of age and self-employed. During the year she reported $400,000 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)?

If a taxpayer's marginal tax rate is decreasing, a taxpayer contributing to a traditional IRA can earn an after-tax rate of return greater than her before-tax rate of return.

During 2014 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 during 2014 is $5,500. How much of a tax-deductible contribution can Jacob make to an IRA?

Scott and his wife Leanne (ages 39 and 37 respectively) earned $50,000 in 2014. Scott was able to contribute $2,400 ($200/month) to his employer sponsored 401(k). What amount of saver's credit can Scott and Leanne claim in 2014?

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

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

Yvette is a 44-year-old self-employed contractor (no employees). During 2014, her Schedule C net income was 400,000. 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)?

Which of the following statements regarding IRAs is false?

Which of the following statements regarding Roth IRAs distributions is true?

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

Individual Income Tax Computation and Tax Credits

Business Income, Deductions, and Accounting Methods

Property Acquisition and Cost Recovery

Property Dispositions

Investments

Compensation

Tax Consequences of Home Ownership

Filters