Question 1

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 percent,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.E) A) and B)
F) None of the above

Question 2

Kathy is 60 years of age and self-employed.During 2019 she reported $100,000 of revenues and $40,000 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 a simplified employee pension (SEP) IRA for 2019? (Round your final answer to the nearest whole number.)

Accepted Answer

A)  $11,152.
B)  $17,152.
C)  $61,000.
D)  $55,000.E) B) and C)
F) A) and B)

Question 3

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 from 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; $500 early distributi...

Question 4

An employer may contribute to an employee's traditional 401(k)account but the employer may not contribute to an employee's Roth 401(k)account.

Accepted Answer

A) True 
 B)False

Question 5

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 6

Riley participates in his employer's 401(k) plan.He turns 69 years of age on February 15,2019,and he plans on retiring on July 1,2019.When must Riley receive his first distribution from the plan to avoid minimum distribution penalties?

Accepted Answer

A)  By April 1,2019.
B)  By April 1,2020.
C)  By April 1,2021.
D)  By April 1,2022.E) A) and B)
F) C) and D)

Question 7

Defined benefit plans specify the amount of benefit an employee will receive on retirement while defined contribution plans specify the amounts that employers and employees will (or can)contribute to an employee's plan.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following statements regarding traditional IRAs is true?

Accepted Answer

A)  Once a taxpayer reaches 55 years of age she is allowed to contribute an additional $1,000 a year.
B)  Taxpayers with high income are not allowed to contribute to traditional IRAs.
C)  Taxpayers who participate in an employer-sponsored retirement plan are allowed to deduct contributions to a traditional IRA regardless of their AGI.
D)  A single taxpayer with no earned income is not allowed to deduct contributions to traditional IRAs.E) B) and C)
F) B) and D)

Question 9

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.E) A) and B)
F) A) and D)

Question 10

Employers may choose whom they allow to participate and whom they do not allow to participate in their nonqualified deferred compensation plans.

Accepted Answer

A) True 
 B)False

Question 11

Dean has earned $70,000 annually for the past four and a half years working as an architect for MWC.Under MWC's defined benefit plan (which uses a five-year cliff vesting schedule) employees earn a benefit equal to 3.5 percent of the average of their three highest annual salaries for every full year of service with MWC.What is Dean's vested benefit (or annual benefit he has earned so far) ?

Accepted Answer

A)  $12,250.
B)  $42,000.
C)  $7,350.
D)  $0.E) A) and B)
F) A) and C)

Question 12

What is the maximum saver's credit available to any taxpayer in 2019?

Accepted Answer

A)  $2,000.
B)  $1,000.
C)  $500.
D)  It depends on the filing status of the taxpayer.E) None of the above
F) A) and B)

Question 13

Which of the following statements regarding vesting in a defined benefit plan is correct?

Accepted Answer

A)  Under a cliff vesting schedule,a portion of an employee's benefits vests each year.
B)  Under a graded vesting schedule,an employee's entire benefit vests all at the same time.
C)  When an employee's benefits vest,she is entitled to participate in the employer's defined benefit plan.
D)  When an employee's benefits vest,she is legally entitled to receive the vested benefits.E) A) and C)
F) B) and C)

Question 14

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 modified AGI.
C)  A taxpayer may contribute to a traditional IRA in 2020 but deduct the contribution on her 2019 tax return.
D)  Taxpayers who have made nondeductible contributions to a traditional IRA are taxed on the full proceeds when they receive distributions from the IRA.E) B) and C)
F) A) and D)

Question 15

When employees contribute to a traditional 401(k) plan,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 notE) All of the above
F) C) and D)

Question 16

Daniela retired at the age of 65.The current balance in her Roth IRA is $200,000.Daniela established the Roth IRA 10 years ago.Through a rollover and annual contributions Daniela has contributed $80,000 to her account.If Daniela receives a $50,000 distribution from the Roth IRA,what amount of the distribution is taxable?

Accepted Answer

A)  $0.
B)  $20,000.
C)  $30,000.
D)  $50,000.E) A) and B)
F) A) and D)

Question 17

The standard retirement benefit an employee will receive under a defined benefit plan depends on the number of years of service the employee provides,but does not consider the amount of the employee's compensation near retirement.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following statements regarding self-employed retirement accounts is true?

Accepted Answer

A)  A self-employed taxpayer who has hired employees may not set up a SEP IRA.
B)  A self-employed taxpayer who has hired employees may set up either a SEP IRA or an individual 401(k) .
C)  A self-employed taxpayer who has hired employees may not set up an individual 401(k) .
D)  All of these choices are correct.E) A) and B)
F) A) and C)

Question 19

Kathy is 60 years of age and self-employed.During 2019 she reported $500,000 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 a simplified employee pension (SEP) IRA for 2019? Assume she pays $27,192 in self-employment for 2019.(Round your final answer to the nearest whole number.)

Accepted Answer

A)  $56,000.
B)  $62,000.
C)  $77,281.
D)  $369,400.E) A) and B)
F) None of the above

Question 20

Kathy is 48 years of age and self-employed.During 2019 she reported $100,000 of revenues and $40,000 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 a simplified employee pension (SEP) IRA for 2019? (Round your final answer to the nearest whole number.)

Accepted Answer

A)  $11,152.
B)  $17,152.
C)  $61,000.
D)  $55,000.E) B) and C)
F) None of the above

Exam 13: Retirement Savings and Deferred Compensation

Riley participates in his employer's 401(k) plan.He turns 69 years of age on February 15,2019,and he plans on retiring on July 1,2019.When must Riley receive his first distribution from the plan to avoid minimum distribution penalties?

Correct Answer
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Correct Answer
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$7,500 income tax; $500 early distributi...
View Answer

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

Correct Answer
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Which of the following statements regarding traditional IRAs is true?

Correct Answer
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Correct Answer
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Which of the following statements regarding vesting in a defined benefit plan is correct?

Correct Answer
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Which of the following statements regarding IRAs is false?

Correct Answer
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Correct Answer
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The standard retirement benefit an employee will receive under a defined benefit plan depends on the number of years of service the employee provides,but does not consider the amount of the employee's compensation near retirement.

Correct Answer
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Defined benefit plans specify the amount of benefit an employee will receive on retirement while defined contribution plans specify the amounts that employers and employees will (or can)contribute to an employee's plan.

Correct Answer
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Which of the following statements regarding self-employed retirement accounts is true?

Correct Answer
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An employer may contribute to an employee's traditional 401(k)account but the employer may not contribute to an employee's Roth 401(k)account.

Correct Answer
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Correct Answer
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Correct Answer
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Employers may choose whom they allow to participate and whom they do not allow to participate in their nonqualified deferred compensation plans.

Correct Answer
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When employees contribute to a traditional 401(k) plan,they allowed to deduct the contributions and they taxed on distributions from the plan.

Correct Answer
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Correct Answer
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Correct Answer
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What is the maximum saver's credit available to any taxpayer in 2019?

Correct Answer
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Exam 13: Retirement Savings and Deferred Compensation

Riley participates in his employer's 401(k) plan.He turns 69 years of age on February 15,2019,and he plans on retiring on July 1,2019.When must Riley receive his first distribution from the plan to avoid minimum distribution penalties?

Correct AnswerverifiedShow Answer

Correct Answerverified$7,500 income tax; $500 early distributi...View AnswerShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following statements regarding traditional IRAs is true?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following statements regarding vesting in a defined benefit plan is correct?

Correct AnswerverifiedShow Answer

Which of the following statements regarding IRAs is false?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The standard retirement benefit an employee will receive under a defined benefit plan depends on the number of years of service the employee provides,but does not consider the amount of the employee's compensation near retirement.

Correct AnswerverifiedShow Answer

Defined benefit plans specify the amount of benefit an employee will receive on retirement while defined contribution plans specify the amounts that employers and employees will (or can)contribute to an employee's plan.

Correct AnswerverifiedShow Answer

Which of the following statements regarding self-employed retirement accounts is true?

Correct AnswerverifiedShow Answer

An employer may contribute to an employee's traditional 401(k)account but the employer may not contribute to an employee's Roth 401(k)account.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Employers may choose whom they allow to participate and whom they do not allow to participate in their nonqualified deferred compensation plans.

Correct AnswerverifiedShow Answer

When employees contribute to a traditional 401(k) plan,they ________ allowed to deduct the contributions and they ________ taxed on distributions from the plan.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

What is the maximum saver's credit available to any taxpayer in 2019?

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
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$7,500 income tax; $500 early distributi...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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When employees contribute to a traditional 401(k) plan,they allowed to deduct the contributions and they taxed on distributions from the plan.

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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