Question 1

Max retired in 2015 at age 62. During the year he received distributions of $12,000 from his IRA. He made nondeductible contributions of $30,000 to the IRA in prior years and has never received a nontaxable distribution. As of December 31, 2015, the value of his IRA was $250,000. Calculate the nontaxable portion of Max's distribution.

Accepted Answer

A)  $1,374. 
B)  $1,440. 
C)  $10,560. 
D) $10,626.

Question 2

Exam Company provides a SIMPLE plan for its employees. Under the plan, employees can contribute up to 6% of their salary and Exam Corporation will match the employee's contribution up to 3% of the employee's salary. Ben, age 44, is an employee of Exam Corporation and elects to contribute the maximum amount of his $95,000 salary to the SIMPLE plan. What is the total contribution made to Ben's SIMPLE account? When does Ben's contribution vest? When does the contribution by Exam Company vest? What is the amount contributed to Ben's account if Ben's salary is $210,000?

Accepted Answer

The answer of Exam Company provides a SIMPLE plan for...

Question 3

SIMPLE plans are not subject to the nondiscrimination rules for other qualified plans.

Accepted Answer

A) True 
 B)False

Question 4

Annually, up to $2,000 per beneficiary can be contributed to a Coverdell Education Savings Account.

Accepted Answer

A) True 
 B)False

Question 5

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

Accepted Answer

A)  The distribution is made to pay an IRS tax levy on the plan. 
B)  The distribution is paid to an employee to be used to pay health insurance premiums. 
C)  The distribution is used to pay for medical expenses above the 10% AGI threshold. 
D) The distribution is made to an employee or retiree on or after age 59½.

Question 6

Distributions from a Coverdell Education Savings Account are tax-free to the beneficiary if they are used for his or her qualified education expenses.

Accepted Answer

A) True 
 B)False

Question 7

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

Accepted Answer

A)  An individual can be the beneficiary of multiple CESAs. 
B)  Annual contributions are limited to $2,000 per beneficiary, per contributor. 
C)  A contributor cannot make a contribution for himself/herself. 
D) For single taxpayers, permitted contributions begin to be phased out when AGI reaches $90,000.

Question 8

Distributions from a traditional IRA:

Accepted Answer

A)  Are fully taxable if the IRA was entirely funded with deductible contributions. 
B)  Are always fully taxable. 
C)  Are always nontaxable. 
D) Are fully taxable if the IRA was entirely funded with nondeductible contributions.

Question 9

Maurice is age 44, single, and reported AGI of $69,000 in tax year 2015. He is an active participant in his employer's pension plan. What is the maximum deductible IRA contribution he can make in 2015?

Accepted Answer

A)  $0. 
B)  $1,100. 
C)  $4,400. 
D) $5,500.

Question 10

Distributions from a qualified pension plan may be fully taxable, nontaxable, or a combination of both.

Accepted Answer

A) True 
 B)False

Question 11

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 2015. Rose worked part-time and earned $1,200. What is the maximum deductible IRA contribution they can make in 2015?

Accepted Answer

A)  $0. 
B)  $5,500. 
C)  $6,700. 
D) $11,000.

Question 12

Which of the following statements is correct?

Accepted Answer

A)  In part, Congress established pension plan rules to encourage individuals to save for retirement. 
B)  Retirement plans are generally not tax-free, only tax-deferred. 
C)  Individuals or companies usually establish a pension plan with a trustee. 
D) All of the statements are correct.

Question 13

For taxpayers under age 50, contributions can be made to a Roth IRA in an amount equal to the lower of $5,500 or 100% of compensation, plus the amount of contributions for the year to other IRAs.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following statements is incorrect?

Accepted Answer

A)  A SIMPLE plan is an employer-sponsored retirement plan. 
B)  A payment to a beneficiary from a pension plan is called a distribution. 
C)  Tax-deferred plans can be created for purposes other than retirement. 
D) Retirement plans are always funded with contributions that have not been taxed, so the withdrawals are taxed.

Question 15

If an individual (or spouse) is an active participant in an employer-sponsored retirement plan, he or she cannot make a deductible IRA contribution.

Accepted Answer

A) True 
 B)False

Question 16

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

Accepted Answer

A)  Distributions used to pay qualified higher education expenses of the beneficiary are tax-free. 
B)  A person can contribute to a CESA only if the beneficiary is related by blood or marriage. 
C)  Taxpayers who file a joint tax return can contribute to a CESA only if their AGI is less than $150,000. 
D) Contributions to a CESA are tax deductible and the distributions are tax-free (if used for their intended purpose).

Question 17

Paulette is age 32, single, and reported AGI of $67,000 in tax year 2015. She is an active participant in her employer's pension plan. What amount of deductible IRA contribution is disallowed in 2015?

Accepted Answer

A)  $0. 
B)  $2,200. 
C)  $3,300. 
D) $5,500.

Question 18

Which of the following statements is incorrect?

Accepted Answer

A)  An annuity is a series of payments pursuant to a contract. 
B)  A payment to a beneficiary from a pension plan is called a distribution. 
C)  Contributions to a pension plan can only be made by the beneficiary. 
D) With a qualified pension plan, earnings on plan assets are not taxed in the year earned.

Question 19

Harriett is age 52, married, and reported AGI of $102,000 in tax year 2015. She is an active participant in her employer's pension plan. What is the maximum deductible IRA contribution she can make for her own account in 2015?

Accepted Answer

A)  $4,400. 
B)  $5,200. 
C)  $6,500. 
D) Some other number.

Question 20

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 2015?

Accepted Answer

A)  $16,000. 
B)  $20,000. 
C)  $53,000. 
D) $64,000.

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

SIMPLE plans are not subject to the nondiscrimination rules for other qualified plans.

Annually, up to $2,000 per beneficiary can be contributed to a Coverdell Education Savings Account.

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

Distributions from a Coverdell Education Savings Account are tax-free to the beneficiary if they are used for his or her qualified education expenses.

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

Distributions from a traditional IRA:

Maurice is age 44, single, and reported AGI of $69,000 in tax year 2015. He is an active participant in his employer's pension plan. What is the maximum deductible IRA contribution he can make in 2015?

Distributions from a qualified pension plan may be fully taxable, nontaxable, or a combination of both.

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 2015. Rose worked part-time and earned $1,200. What is the maximum deductible IRA contribution they can make in 2015?

Which of the following statements is correct?

For taxpayers under age 50, contributions can be made to a Roth IRA in an amount equal to the lower of $5,500 or 100% of compensation, plus the amount of contributions for the year to other IRAs.

Which of the following statements is incorrect?

If an individual (or spouse) is an active participant in an employer-sponsored retirement plan, he or she cannot make a deductible IRA contribution.

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

Paulette is age 32, single, and reported AGI of $67,000 in tax year 2015. She is an active participant in her employer's pension plan. What amount of deductible IRA contribution is disallowed in 2015?

Which of the following statements is incorrect?

Harriett is age 52, married, and reported AGI of $102,000 in tax year 2015. She is an active participant in her employer's pension plan. What is the maximum deductible IRA contribution she can make for her own account in 2015?

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 2015?