Question 1

Which of the following statements is incorrect?

Accepted Answer

A)  Qualified pension plans may be contributory or noncontributory. 
B)  An employer can require employees to make contributions as long as the plan is non-discriminatory. 
C)  A profit-sharing plan does not qualify as a pension plan because the amount of profit in a year cannot be known in advance. 
D) With a defined-contribution plan, the amount of total retirement benefits is unknown.

Question 2

Hamden is entitled to receive monthly payments of $6,000 over his life from his employer's qualified pension plan. The payments begin January 1, 2015. He contributed $286,000 to the plan prior to his retirement at age 62. Using the simplified method, what amount of the payments will be excluded from Hamden's taxable income for 2015?

Accepted Answer

A)  $0. 
B)  $13,200. 
C)  $58,800. 
D) $72,000.

Question 3

SIMPLE and SEP plans are subject to the same nondiscrimination rules that apply to other retirement plans.

Accepted Answer

A) True 
 B)False

Question 4

Retirement plans can be categorized into employer-sponsored plans and individual-based plans. What is the distinction? Give examples of plans in both categories.

Accepted Answer

The answer of Retirement plans can be categorized into employer-sponsored...

Question 5

Individuals who are active participants in an employer-sponsored retirement plan may make a deductible contribution to a traditional IRA in certain circumstances.

Accepted Answer

A) True 
 B)False

Question 6

For all annuity contracts, to determine the expected return, use the IRS tables for either a single life or a dual life annuity.

Accepted Answer

A) True 
 B)False

Question 7

Paolo is age 77. He paid $240,000 for a single life annuity contract that will pay him $43,200 per year for life. The tax-free amount of the first $43,200 payment is

Accepted Answer

A)  $11,321. 
B)  $19,835. 
C)  $21,771. 
D) $21,429.

Question 8

Omar is single, age 46, and reported AGI of $126,000 in tax year 2015. He is an active participant in his employer's pension plan. What is the maximum Roth IRA contribution he can make in 2015?

Accepted Answer

A)  $0. 
B)  $1,833. 
C)  $3,667. 
D) $5,500.

Question 9

If a taxpayer pays for an annuity contract with after-tax dollars, all payments received under the contract will be tax-free until the original cost is recovered.

Accepted Answer

A) True 
 B)False

Question 10

Venkat is age 32, single, and reported AGI of $67,000 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)  $2,200. 
C)  $3,300. 
D) $5,500.

Question 11

Which of the following statements regarding Individual Retirement Accounts (IRA) is incorrect?

Accepted Answer

A)  Contributions to a conventional IRA may be tax-deductible while contributions to a Roth IRA are never tax-deductible. 
B)  Excess contributions to an IRA are subject to an excise tax. 
C)  Because IRA contributions are based on compensation, a non-working spouse cannot make a contribution to an IRA. 
D) Once a taxpayer reaches age 70½, deductible contributions cannot be made to a conventional IRA.

Question 12

There are two types of IRAs: a traditional IRA and a Roth IRA.

Accepted Answer

A) True 
 B)False

Question 13

A pension or profit-sharing plan must not discriminate in favor of highly compensated employees. What employees meet the definition of "highly compensated" for purposes of these plans?

Accepted Answer

The answer of A pension or profit-sharing plan must not...

Question 14

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

Accepted Answer

A)  Employer contributions are deductible when made. 
B)  Earnings on the contributions are taxable to the employee as they are earned. 
C)  Employees are not taxed until distributions are received from the plan. 
D) Employer contributions are deductible when made and Employees are not taxed until distributions are received from the plan.

Question 15

Chandelle and Treymane are married and have combined AGI of $215,000. They would like to contribute to a Coverdell Education Savings Account for their grandson. What is the maximum contribution they can make in 2015?

Accepted Answer

A)  $2,000. 
B)  $1,667. 
C)  $333. 
D) $0.

Question 16

Which of the following statements is incorrect?

Accepted Answer

A)  The exclusion ratio represents the proportion of each annuity payment that will be tax-free. 
B)  If annuity payments are to be received for a fixed period, the taxpayer does not need to refer to the life expectancy tables provided by the IRS. 
C)  To determine the taxable amount of each annuity payment, the taxpayer must know the cost of the contract. 
D) Once the cost of the annuity has been recovered, any remaining payments will be tax-free.

Question 17

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 2015. What is the maximum permitted Coverdell Education Savings Account contribution that Benjamin and Ester can make in 2015?

Accepted Answer

A)  $0. 
B)  $1,000. 
C)  $2,000. 
D) $5,500.

Question 18

Keisha established a Roth IRA in 2005. She contributes the maximum amount each year for the next 20 years and retires when she is 65. At the time of her retirement, the account has a balance of $248,000, which is made up of $100,000 in contributions and the balance in earnings. What amount can Keisha withdraw tax-free from the Roth IRA each year during her retirement?

Accepted Answer

The answer of Keisha established a Roth IRA in 2005....

Question 19

The expected return on an annuity contract that will last for a specified amount of time is determined with reference to the life expectancy tables published by the IRS.

Accepted Answer

A) True 
 B)False

Question 20

Damian is age 79. He purchased a single life annuity contract that will pay him $4,000 per month for life. The expected return on the contract is:

Accepted Answer

A)  $40,000. 
B)  $480,000. 
C)  $518,400. 
D) $936,000.

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

Which of the following statements is incorrect?

SIMPLE and SEP plans are subject to the same nondiscrimination rules that apply to other retirement plans.

Retirement plans can be categorized into employer-sponsored plans and individual-based plans. What is the distinction? Give examples of plans in both categories.

Individuals who are active participants in an employer-sponsored retirement plan may make a deductible contribution to a traditional IRA in certain circumstances.

For all annuity contracts, to determine the expected return, use the IRS tables for either a single life or a dual life annuity.

Paolo is age 77. He paid $240,000 for a single life annuity contract that will pay him $43,200 per year for life. The tax-free amount of the first $43,200 payment is

Omar is single, age 46, and reported AGI of $126,000 in tax year 2015. He is an active participant in his employer's pension plan. What is the maximum Roth IRA contribution he can make in 2015?

If a taxpayer pays for an annuity contract with after-tax dollars, all payments received under the contract will be tax-free until the original cost is recovered.

Venkat is age 32, single, and reported AGI of $67,000 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?

Which of the following statements regarding Individual Retirement Accounts (IRA) is incorrect?

There are two types of IRAs: a traditional IRA and a Roth IRA.

A pension or profit-sharing plan must not discriminate in favor of highly compensated employees. What employees meet the definition of "highly compensated" for purposes of these plans?

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

Chandelle and Treymane are married and have combined AGI of $215,000. They would like to contribute to a Coverdell Education Savings Account for their grandson. What is the maximum contribution they can make in 2015?

Which of the following statements is incorrect?

The expected return on an annuity contract that will last for a specified amount of time is determined with reference to the life expectancy tables published by the IRS.

Damian is age 79. He purchased a single life annuity contract that will pay him $4,000 per month for life. The expected return on the contract is: