Question 1

Which of the following best describes distributions from a traditional defined contribution plan?

Accepted Answer

A)   Distributions from defined contribution plans are fully taxable to the recipient as ordinary income.
B)   Distributions from defined contribution plans are partially taxable to the recipient as ordinary income and partially nontaxable as a return of capital.
C)   Distributions from defined contribution plans are fully taxable to the recipient as long-term capital gains.
D)   Distributions from defined contribution plans are partially taxable to the recipient as capital gains and partially nontaxable as a return of capital.E) A) and C)
F) B) and C)

Question 2

Which of the following describes a defined benefit plan?

Accepted Answer

A)   Provides fixed income to the plan participants based on a formula.
B)   Distribution amounts determined by employee and employer contributions.
C)   Allows executives to defer income for a period of years.
D)   Retirement account set up by an individual.E) C) and D)
F) A) and B)

Question 3

A taxpayer can only receive a saver's credit if she contributes to a qualified retirement account.

Accepted Answer

A) True 
 B)False

Question 4

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. Tyson's marginal tax rate is 25%. 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. He retains $12,500 to pay tax on the distribution and he contributes $37,500 to a Roth IRA. What amount of income tax and penalty must Tyson pay on this series of transactions?

Accepted Answer

A)   $0 income tax; $0 penalty.
B)   $12,500 income tax; $1,250 penalty.
C)   $12,500 income tax; $3,000 penalty.
D)   $12,500 income tax; $5,000 penalty.E) A) and B)
F) A) and C)

Question 5

Employee contributions to traditional 401(k) accounts are deductible by the employee, but employee contributions to Roth 401(k) accounts are not.

Accepted Answer

A) True 
 B)False

Question 6

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 7

Georgeanne has been employed by SEC Corp. for the last 2½ years. Georgeanne participates in SEC's 401(k) plan. During her employment, Georgeanne has contributed $6,000 to her 401(k) account. SEC has contributed $3,000 to Georgeanne's 401(k) account (it matched 50 cents of every dollar contributed). SEC uses a three-year cliff vesting schedule. If Georgeanne were to quit her job with SEC, what would be her vested benefit in her 401(k) account (assume the account balance is $9,000)?

Accepted Answer

$6,000
Georgeanne fully vests ...

Question 8

In 2018, Tyson (age 22) earned $3,500 from his part-time job and he reported $15,000 of interest income (unearned income). Assuming he does not participate in an employer-sponsored plan, what is the maximum deductible IRA contribution Tyson can make in 2018?

Accepted Answer

$3,500
Deductible co...

Question 9

Which of the following best describes distributions from a defined benefit plan?

Accepted Answer

A)   Distributions from defined benefit plans are taxable as ordinary income.
B)   Distributions from defined benefit plans are partially taxable as ordinary income and partially nontaxable as a return of capital.
C)   Distributions from defined benefit plans are taxable as capital gains.
D)   Distributions from defined benefit plans are partially taxable as capital gains and partially nontaxable as a return of capital.E) B) and C)
F) A) and D)

Question 10

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) B) and C)
F) A) and C)

Question 11

Amy is single. During 2018, she determined her adjusted gross income was $12,000. During the year, Amy also contributed $1,500 to a Roth IRA. What is the maximum saver's credit she may claim for the year?

Accepted Answer

A)   $750.
B)   $1,000.
C)   $1,500.
D)   $0.E) All of the above
F) B) and D)

Question 12

In general, which of the following statements regarding self-employed retirement accounts is True?

Accepted Answer

A)   In general, SEP IRAs have higher contribution limits than individual 401(k) s if the contributing taxpayer is at least 50 years of age at year end.
B)   In general, SEP IRAs have higher contribution limits than individual 401(k) s no matter the age of the contributing taxpayer.
C)   In general, Individual 401(k) s have higher contribution limits than SEP IRAs.
D)   None of the choices are True. In general, both SEP IRAs and individual 401(k) s have exactly the same annual contribution limits.E) A) and B)
F) C) and D)

Question 13

Amy is single. During 2018, she determined her adjusted gross income was $12,000. During the year, Amy also contributed $2,500 to a Roth IRA. What is the maximum saver's credit she may claim for the year?

Accepted Answer

A)   $1,250.
B)   $2,500.
C)   $1,000.
D)   $0.E) All of the above
F) B) and C)

Question 14

Riley participates in his employer's 401(k)  plan. He turns 69 years of age on February 15, 2018, and he plans on retiring on July 1, 2018. When must Riley receive his first distribution from the plan to avoid minimum distribution penalties?

Accepted Answer

A)   By April 1, 2018.
B)   By April 1, 2019.
C)   By April 1, 2020.
D)   By April 1, 2021.E) All of the above
F) A) and D)

Question 15

What is the maximum saver's credit available to any taxpayer in 2018?

Accepted Answer

A)   $2,000.
B)   $1,000.
C)   $500.
D)   It depends on the filing status of the taxpayer.E) B) and C)
F) A) and D)

Question 16

Katrina's executive compensation package allows her to participate in the company's nonqualified deferred compensation plan. This year, Katrina defers 20 percent of her $400,000 salary. Katrina's deemed investment choice will earn 7 percent annually on the deferred compensation until she takes a lump sum distribution in 10 years. Katrina's current marginal tax rate is 30 percent and she expects her marginal tax rate will be 35 percent upon receipt of the deferred salary. What is her after-tax accumulation from the deferred salary in 10 years? (Round future value factors to 5 decimal places and the future value and final answers to the nearest whole number)

Accepted Answer

$102,292
$80,000 ($400,000 × 2...

Question 17

Both traditional 401(k) plans and Roth 401(k) plans are forms of defined contribution plans.

Accepted Answer

A) True 
 B)False

Question 18

High-income taxpayers are not allowed to receive the saver's credit.

Accepted Answer

A) True 
 B)False

Question 19

Kathy is 60 years of age and self-employed. During 2018 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 2018? (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

Question 20

Which of the following statements regarding Roth IRAs is False?

Accepted Answer

A)   Contributions to Roth IRAs are not deductible.
B)   Qualified 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 modified AGI does not exceed certain thresholds.
D)   Taxpayers who are married and file separately are not allowed to contribute to Roth IRAs.E) B) and D)
F) C) and D)

Exam 13: Retirement Savings and Deferred Compensation

Correct Answer
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In 2018, Tyson (age 22) earned $3,500 from his part-time job and he reported $15,000 of interest income (unearned income). Assuming he does not participate in an employer-sponsored plan, what is the maximum deductible IRA contribution Tyson can make in 2018?

Correct Answer
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$3,500
Deductible co...
View Answer

Correct Answer
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Which of the following best describes distributions from a traditional defined contribution plan?

Correct Answer
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High-income taxpayers are not allowed to receive the saver's credit.

Correct Answer
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Which of the following statements regarding Roth IRAs is False?

Correct Answer
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Employee contributions to traditional 401(k) accounts are deductible by the employee, but employee contributions to Roth 401(k) accounts are not.

Correct Answer
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Amy is single. During 2018, she determined her adjusted gross income was $12,000. During the year, Amy also contributed $2,500 to a Roth IRA. What is the maximum saver's credit she may claim for the year?

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

Correct Answer
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Correct Answer
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$6,000
Georgeanne fully vests ...
View Answer

Amy is single. During 2018, she determined her adjusted gross income was $12,000. During the year, Amy also contributed $1,500 to a Roth IRA. What is the maximum saver's credit she may claim for the year?

Correct Answer
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Correct Answer
verified
$102,292
$80,000 ($400,000 × 2...
View Answer

Which of the following best describes distributions from a defined benefit plan?

Correct Answer
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A taxpayer can only receive a saver's credit if she contributes to a qualified retirement account.

Correct Answer
verified

Both traditional 401(k) plans and Roth 401(k) plans are forms of defined contribution plans.

Correct Answer
verified

In general, which of the following statements regarding self-employed retirement accounts is True?

Correct Answer
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What is the maximum saver's credit available to any taxpayer in 2018?

Correct Answer
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Riley participates in his employer's 401(k) plan. He turns 69 years of age on February 15, 2018, and he plans on retiring on July 1, 2018. When must Riley receive his first distribution from the plan to avoid minimum distribution penalties?

Correct Answer
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Which of the following describes a defined benefit plan?

Correct Answer
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Exam 13: Retirement Savings and Deferred Compensation

Correct AnswerverifiedShow Answer

In 2018, Tyson (age 22) earned $3,500 from his part-time job and he reported $15,000 of interest income (unearned income). Assuming he does not participate in an employer-sponsored plan, what is the maximum deductible IRA contribution Tyson can make in 2018?

Correct Answerverified$3,500Deductible co...View AnswerShow Answer

Correct AnswerverifiedShow Answer

Which of the following best describes distributions from a traditional defined contribution plan?

Correct AnswerverifiedShow Answer

High-income taxpayers are not allowed to receive the saver's credit.

Correct AnswerverifiedShow Answer

Which of the following statements regarding Roth IRAs is False?

Correct AnswerverifiedShow Answer

Employee contributions to traditional 401(k) accounts are deductible by the employee, but employee contributions to Roth 401(k) accounts are not.

Correct AnswerverifiedShow Answer

Amy is single. During 2018, she determined her adjusted gross income was $12,000. During the year, Amy also contributed $2,500 to a Roth IRA. What is the maximum saver's credit she may claim for the year?

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

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

Correct AnswerverifiedShow Answer

Correct Answerverified$6,000Georgeanne fully vests ...View AnswerShow Answer

Amy is single. During 2018, she determined her adjusted gross income was $12,000. During the year, Amy also contributed $1,500 to a Roth IRA. What is the maximum saver's credit she may claim for the year?

Correct AnswerverifiedShow Answer

Correct Answerverified$102,292$80,000 ($400,000 × 2...View AnswerShow Answer

Which of the following best describes distributions from a defined benefit plan?

Correct AnswerverifiedShow Answer

A taxpayer can only receive a saver's credit if she contributes to a qualified retirement account.

Correct AnswerverifiedShow Answer

Both traditional 401(k) plans and Roth 401(k) plans are forms of defined contribution plans.

Correct AnswerverifiedShow Answer

In general, which of the following statements regarding self-employed retirement accounts is True?

Correct AnswerverifiedShow Answer

What is the maximum saver's credit available to any taxpayer in 2018?

Correct AnswerverifiedShow Answer

Riley participates in his employer's 401(k) plan. He turns 69 years of age on February 15, 2018, and he plans on retiring on July 1, 2018. When must Riley receive his first distribution from the plan to avoid minimum distribution penalties?

Correct AnswerverifiedShow Answer

Which of the following describes a defined benefit plan?

Correct AnswerverifiedShow Answer

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Correct Answer
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$3,500
Deductible co...
View Answer

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Correct Answer
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Correct Answer
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Correct Answer
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$6,000
Georgeanne fully vests ...
View Answer

Correct Answer
verified

Correct Answer
verified
$102,292
$80,000 ($400,000 × 2...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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