Question 1

Mark is single and must start making distributions from his traditional IRA beginning April 1, 2015. At the end of 2014 when Mark was 71 years old, the IRA had a balance of $110,000. What amount must Mark take as a distribution from the IRA by April 1, 2015?

Accepted Answer

The required minimum distribution (RMD) for 2015 is calculated by dividing the account balance at the end of the previous year ($110,000) by the applicable life expectancy factor for Mark's age (71). The applicable life expectancy factor for age 71 is 26.2. Therefore, the RMD for 2015 is $110,000 / 26.2 = $4,198.47. Since the RMD must be taken by April 1, 2015, Mark must take a distribution of at least $4,198.47 by that date.

Question 2

To calculate the taxable portion of an annuity payment, a taxpayer must determine all of the following except:

Accepted Answer

The year in which annuity payments were first received is not directly used to calculate the taxable portion of an annuity payment. The calculation involves the cost of the annuity contract, the expected return, and the amount and frequency of the annuity payments to determine the exclusion ratio and taxable amount.

Question 3

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

The answer of Harriett is age 52, married, and reported...

Question 4

Puri is a self-employed Spanish teacher. Her earnings from self-employment before the Keogh deduction but after deducting half of the self-employment tax are $120,000. What is her maximum deductible Keogh contribution for 2015?

Accepted Answer

For 2015, the maximum deductible contribution to a Keogh plan is 20% of net earnings from self-employment. After deducting half of the self-employment tax, Puri's net earnings are $120,000. Therefore, her maximum deductible Keogh contribution is 20% of $120,000, which is $24,000.

Question 5

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

The maximum contribution to a Coverdell ESA is $2,000 per beneficiary. However, for married couples filing jointly, the contribution limit is reduced if their modified AGI is between $190,000 and $220,000. Since their AGI is $215,000, they fall within this phase-out range. The reduction is calculated as follows: $2,000 * ($220,000 - $215,000) / $30,000 = $333.33, which rounds down to $333.

Question 6

Gwen is age 51, married, and reported AGI of $101,000 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

The answer of Gwen is age 51, married, and reported...

Question 7

Augustus is single and age 51. He had AGI of $41,000 in tax year 2015 and is an active participant in his employer's pension plan. What is the maximum deductible IRA contribution he can make in 2015?

Accepted Answer

The answer of Augustus is single and age 51. He...

Question 8

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

Accepted Answer

The answer of Which of the following statements regarding a...

Question 9

Which of the following statements is incorrect?

Accepted Answer

Roth IRA distributions can be taxable if the account is not held for at least five years or if the distribution is made before the account owner reaches age 59½. However, qualified distributions from a Roth IRA are tax-free.

Question 10

All of the following are employer-sponsored plans except:

Accepted Answer

A Coverdell Education Savings Account is not an employer-sponsored plan, it is an individual account that is used to save for education expenses. The other options, Qualified profit-sharing plan, Keogh plan, and 403(b), are all employer-sponsored plans.

Question 11

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

Accepted Answer

Distributions from a retirement plan are generally subject to a 10% additional tax if withdrawn before age 59½. However, there are certain exceptions to this rule, such as when the distribution is used to pay for medical expenses above the 10% AGI threshold, to pay an IRS tax levy on the plan, or in the case of death or disability of the account holder. In option B, the distribution is paid to an employee to be used to pay health insurance premiums, which is also an exception to the 10% additional tax. Option D is incorrect as it is a general rule that applies to all retirement plan distributions made after age 59½, not an exception to the 10% additional tax.

Question 12

Which of the following statements is incorrect?

Accepted Answer

Annuity payments can vary in amount; they can be fixed or variable, depending on the terms of the annuity contract.

Question 13

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

Because Paulette is an active participant in her employer's pension plan, the phaseout range for deductible IRA contributions in 2015 is $61,000 to $71,000 for a single taxpayer. Since Paulette's AGI is within this range, she can make a deductible IRA contribution, but it will be partially phased out. The maximum amount she can deduct is $3,300, calculated as follows:

$5,500 (the 2015 IRA contribution limit) - [$1,000 x ($67,000 - $61,000) / $10,000] = $3,300

Therefore, $3,300 of Paulette's IRA contribution will be disallowed as a deduction on her tax return.

Question 14

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

Accepted Answer

A non-working spouse can contribute to an IRA through a spousal IRA, provided the other spouse has sufficient earned income. This allows the non-working spouse to have an IRA in their name, despite not having earned income themselves.

Question 15

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

For 2015, the IRA deduction limit for single filers who are active participants in an employer's plan begins to phase out at an AGI of $61,000 and is completely phased out at $71,000. Maurice's AGI of $69,000 falls within the phase-out range, allowing a partial deduction.

Question 16

Patrick is age 30, single, and has AGI of $101,000. He would like to contribute to a Coverdell Education Savings Account (CESA) for his niece, Eileen. What is the maximum CESA contribution Patrick can make for Eileen in 2015?

Accepted Answer

Patrick's AGI is over the modified AGI limit of $95,000 for 2015, so he cannot contribute to a CESA for Eileen.

Question 17

Which of the following statements is incorrect?

Accepted Answer

This statement is not always true. While most retirement plans are funded with pre-tax contributions and the withdrawals are taxed, there are also some plans, such as Roth IRA's, where contributions are taxed upfront and withdrawals are tax-free.

Question 18

In 2015, a 48-year-old participant in a 401(k) plan may contribute a maximum of:

Accepted Answer

The maximum contribution for a 401(k) plan participant who is 48 years old in 2015 is $18,000. Option A is the maximum contribution limit for individuals making annual contributions to an IRA. Option B is the maximum contribution limit for individuals making annual contributions to a SIMPLE IRA plan. Option D is the maximum contribution limit for individuals making annual contributions to a Roth 401(k) plan or traditional 401(k) plan with catch-up contributions allowed.

Question 19

Which of the following statements is incorrect?

Accepted Answer

The incorrect statement is D because once the cost of the annuity has been recovered, any remaining payments are fully taxable, not tax-free. The exclusion ratio only applies until the cost basis is recovered; after that, payments are considered income and taxed accordingly.

Question 20

DJ is age 27, 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

The answer of DJ is age 27, single, and reported...

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

Mark is single and must start making distributions from his traditional IRA beginning April 1, 2015. At the end of 2014 when Mark was 71 years old, the IRA had a balance of $110,000. What amount must Mark take as a distribution from the IRA by April 1, 2015?

To calculate the taxable portion of an annuity payment, a taxpayer must determine all of the following except:

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?

Puri is a self-employed Spanish teacher. Her earnings from self-employment before the Keogh deduction but after deducting half of the self-employment tax are $120,000. What is her maximum deductible Keogh contribution for 2015?

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?

Gwen is age 51, married, and reported AGI of $101,000 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?

Augustus is single and age 51. He had AGI of $41,000 in tax year 2015 and 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 a Coverdell Education Savings Account (CESA) is correct?

Which of the following statements is incorrect?

All of the following are employer-sponsored plans except:

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

Which of the following statements is incorrect?

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 regarding Individual Retirement Accounts (IRA) is incorrect?

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?

Patrick is age 30, single, and has AGI of $101,000. He would like to contribute to a Coverdell Education Savings Account (CESA) for his niece, Eileen. What is the maximum CESA contribution Patrick can make for Eileen in 2015?

Which of the following statements is incorrect?

In 2015, a 48-year-old participant in a 401(k) plan may contribute a maximum of:

Which of the following statements is incorrect?

DJ is age 27, 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?