Question 1

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 2

Qualifying distributions from traditional IRAs are nontaxable while qualifying distributions from Roth IRAs are fully taxable as ordinary income.

Accepted Answer

A) True 
 B)False

Question 3

In 2014, Jessica retired at the age of 65. The current balance in her traditional IRA was $200,000. Over the years, Jessica had made $20,000 of nondeductible contributions and $60,000 of deductible contributions to the account. If Jessica receives a $50,000 distribution from the IRA, what amount of the distribution is taxable?

Accepted Answer

A)  $0 
B)  $5,000 
C)  $37,500 
D)  $45,000 
E)  $50,000 
A)  $0 
B)  $5,000 
C)  $37,500 
D)  $45,000 
E)  $50,000

Question 4

Qualified retirement plans include defined benefit plans but not defined contribution plans.

Accepted Answer

A) True 
 B)False

Question 5

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 6

Which of the following statements regarding Roth IRAs is false?

Accepted Answer

A)  Contributions to Roth IRAs are not deductible. 
B)  Qualifying distributions from Roth IRAs are not taxable. 
C)  Whether or not they participate in an employer-sponsored retirement plan, taxpayers are allowed to contribute to Roth IRAs as long as their AGI does not exceed certain thresholds. 
D)  Taxpayers who are married and file separately are not allowed to contribute to a Roth IRA. 
A)  Contributions to Roth IRAs are not deductible. 
B)  Qualifying distributions from Roth IRAs are not taxable. 
C)  Whether or not they participate in an employer-sponsored retirement plan, taxpayers are allowed to contribute to Roth IRAs as long as their AGI does not exceed certain thresholds. 
D)  Taxpayers who are married and file separately are not allowed to contribute to a Roth IRA.

Question 7

Tyson (48 years old) owns a traditional IRA with a current balance of $50,000. The balance consists of $30,000 of deductible contributions and $20,000 of account earnings. Convinced that his marginal tax rate will increase in the future, Tyson receives a distribution of the entire $50,000 balance of his traditional IRA and he immediately contributes the $50,000 to a Roth IRA. Assuming his marginal tax rate is 25%, what amount of penalty, if any, must Tyson pay on the distribution from the traditional IRA?

Accepted Answer

A)  $0. 
B)  $1,250. 
C)  $3,750. 
D)  $5,000. 
A)  $0. 
B)  $1,250. 
C)  $3,750. 
D)  $5,000.

Question 8

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 9

When employees contribute to a Roth 401(k) account, they _____ allowed to deduct the contributions and they _______ taxed on distributions from the plan.

Accepted Answer

A)  are; are not 
B)  are; are 
C)  are not; are 
D)  are not; are not 
A)  are; are not 
B)  are; are 
C)  are not; are 
D)  are not; are not

Question 10

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 11

Which of the following statements comparing qualified defined contribution plans and nonqualified deferred compensation plans is false?

Accepted Answer

A)  Employers must fund qualified defined contribution plans but not nonqualified deferred compensation plans. 
B)  Qualified defined contribution plans are subject to formal vesting requirements while nonqualified deferred compensation plans are not. 
C)  Distributions from both types of plans are taxed at ordinary income tax rates. 
D)  In terms of tax consequences to the employee, earnings on qualified plans (except Roth plans) are deferred until distributed to the employee but earnings on nonqualified plans are immediately taxable. 
A)  Employers must fund qualified defined contribution plans but not nonqualified deferred compensation plans. 
B)  Qualified defined contribution plans are subject to formal vesting requirements while nonqualified deferred compensation plans are not. 
C)  Distributions from both types of plans are taxed at ordinary income tax rates. 
D)  In terms of tax consequences to the employee, earnings on qualified plans (except Roth plans) are deferred until distributed to the employee but earnings on nonqualified plans are immediately taxable.

Question 12

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 13

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 14

In 2014, Tyson (age 52) earned $50,000 of salary. Assuming he does not participate in an employer-sponsored plan, what is the maximum deductible IRA contribution Tyson can make in 2014?

Accepted Answer

The answer of In 2014, Tyson (age 52) earned $50,000...

Question 15

Individual 401(k) plans generally have higher contribution limits than SEP IRAs.

Accepted Answer

A) True 
 B)False

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

Qualifying distributions from traditional IRAs are nontaxable while qualifying distributions from Roth IRAs are fully taxable as ordinary income.

Qualified retirement plans include defined benefit plans but not defined contribution plans.

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

Which of the following statements regarding Roth IRAs is false?

When employees contribute to a Roth 401(k) account, they _ allowed to deduct the contributions and they ___ taxed on distributions from the plan.

Which of the following statements comparing qualified defined contribution plans and nonqualified deferred compensation plans is false?

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?

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)?

In 2014, Tyson (age 52) earned $50,000 of salary. Assuming he does not participate in an employer-sponsored plan, what is the maximum deductible IRA contribution Tyson can make in 2014?

Individual 401(k) plans generally have higher contribution limits than SEP IRAs.

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

Entities Overview

Corporate Operations

Accounting for Income Taxes

Corporate Taxation: Nonliquidating Distributions

Corporate Formation, Reorganization, and Liquidation

Forming and Operating Partnerships

Dispositions of Partnership Interests and Partnership Distributions

S Corporations

State and Local Taxes

The US Taxation of Multinational Transactions

Transfer Taxes and Wealth Planning of the Cfa Institute

Filters

Exam 13: Retirement Savings and Deferred Compensation

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

Qualifying distributions from traditional IRAs are nontaxable while qualifying distributions from Roth IRAs are fully taxable as ordinary income.

Qualified retirement plans include defined benefit plans but not defined contribution plans.

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

Which of the following statements regarding Roth IRAs is false?

When employees contribute to a Roth 401(k) account, they _____ allowed to deduct the contributions and they _______ taxed on distributions from the plan.

Which of the following statements comparing qualified defined contribution plans and nonqualified deferred compensation plans is false?

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?

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)?

In 2014, Tyson (age 52) earned $50,000 of salary. Assuming he does not participate in an employer-sponsored plan, what is the maximum deductible IRA contribution Tyson can make in 2014?

Individual 401(k) plans generally have higher contribution limits than SEP IRAs.

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

Entities Overview

Corporate Operations

Accounting for Income Taxes

Corporate Taxation: Nonliquidating Distributions

Corporate Formation, Reorganization, and Liquidation

Forming and Operating Partnerships

Dispositions of Partnership Interests and Partnership Distributions

S Corporations

State and Local Taxes

The US Taxation of Multinational Transactions

Transfer Taxes and Wealth Planning of the Cfa Institute

Filters

When employees contribute to a Roth 401(k) account, they _ allowed to deduct the contributions and they ___ taxed on distributions from the plan.