Chapter 13 Retirement Savings and Deferred Compensation

| November 9, 2018

62.

Which of the
following statements regarding IRAs is false?

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 AGI.

C.

A taxpayer
may contribute to a traditional IRA in 2015 but deduct the contribution in
2014.

D.

Taxpayers
who have made nondeductible contributions to a traditional IRA are taxed on
the full proceeds when they receive distributions from the IRA.

63.

Bryan, who is
45 years old, had some surprise medical expenses during the year. To pay for
these expenses (which were claimed as itemized deductions on his tax return),
he received a $20,000 distribution from his traditional IRA (he has only made
deductible contributions to the IRA). Assuming his marginal ordinary income
tax rate is 15%, what amount of taxes and/or early distribution penalties
will Bryan be required to pay on this distribution?

A.

$3,000
income tax; $2,000 early distribution penalty

B.

$3,000
income tax; $0 early distribution penalty

C.

$0 income
tax; $2,000 early distribution penalty

D.

$0 income
tax; $0 early distribution penalty

64.

In 2014,
Jessica retired at the age of 65. The current balance in her traditional IRA
was $200,000. Over the years, Jessica had made $20,000 of nondeductible contributions
and $60,000 of deductible contributions to the account. If Jessica receives a
$50,000 distribution from the IRA, what amount of the distribution is
taxable?

A.

$0

B.

$5,000

C.

$37,500

D.

$45,000

E.

$50,000

65.

Which of the
following statements regarding Roth IRAs is false?

A.

Contributions
to Roth IRAs are not deductible.

B.

Qualifying
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 AGI does not exceed
certain thresholds.

D.

Taxpayers
who are married and file separately are not allowed to contribute to a Roth
IRA.

66.

Which of the
following statements regarding Roth IRAs distributions is true?

A.

A
distribution is not a qualifying distribution unless the distribution is at
least two years after the taxpayer has opened the Roth IRA.

B.

A taxpayer
receiving a distribution from a Roth IRA before reaching the age of 55 is
generally not subject to an early distribution penalty.

C.

A Roth IRA
does not have minimum distribution requirements.

D.

The full
amount of all nonqualifying distributions is subject to tax at the
taxpayer’s marginal tax rate.

67.

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?

A.

$0

B.

$20,000

C.

$30,000

D.

$50,000

68.

Lisa, age 45,
needed some cash so she received a $50,000 distribution from her Roth IRA. At
the time of the distribution, the balance in the Roth IRA was $200,000. Lisa
established the Roth IRA 8 years ago. Through a rollover and annual
contributions, she has contributed $80,000 to her account. What amount of the
distribution is taxable and subject to early distribution penalty?

A.

$0

B.

$20,000

C.

$30,000

D.

$50,000

69.

Lisa, age 45,
needed some cash so she received a $50,000 distribution from her Roth IRA. At
the time of the distribution, the balance in the Roth IRA was $200,000. Lisa
established the Roth IRA 10 years ago. Over the years, she has contributed
$20,000 to her account. What amount of the distribution is taxable and
subject to early distribution penalty?

A.

$0

B.

$5,000

C.

$30,000

D.

$50,000

70.

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%, what amount of penalty, if any, must
Tyson pay on the distribution from the traditional IRA?

A.

$0.

B.

$1,250.

C.

$3,750.

D.

$5,000.

71.

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?

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.

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