Review Questions Module 2

Unless otherwise noted, assume the following questions relate to participants under age 50.

  Dr. Knight,  a retired dentist aged 73, earned $5,000 speaking at a seminar in 2011.  How much may he contribute to a Roth IRA?

   a.   0
   b.   $2,500
   c.   $5,000
   d.   $6,000

    Roth IRAs are sometimes called:

     a.     SEP IRAs
     b.     SIMPLE IRAs
     c.     backloaded IRAs
     d.     nondeductible IRAs

   Contributions to a Roth IRA are:

     a.     always tax deductible
     b.     sometimes tax deductible
     c.     never tax deductible
     d.     subject to the same rules as traditional IRAs

     Which of the following are true?

     a.     Persons over age 70½ may establish a Roth IRA
     b.     Persons over age  70½ may contribute to a Roth IRA
     c.     Persons over age 70½  may rollover IRA assets
     d.     all of the above

   Which of the following may NOT contribute to a Roth IRA?

     a.     a 75-year old single taxpayer with earned income of $105000
     b.     a 65-year old married taxpayer earning $150,000
     c.     a 45-year old single taxpayer with earned income of $95,000
     d.     a 39-year old married taxpayer earning  $195,000

    Which of the following "active plan participants" may NOT contribute to any IRA this year?

     a.     Mr. Able, a 69-year old single taxpayer earning $75,000
     b.     Ms. Bravo, a 74-year old married taxpayer earning $10,000
     c.     Mr. Charlie, a 65-year old married taxpayer earning $17,000
     d.     Ms. Delta, a 72-year old single taxpayer earning $120,000

    The maximum amount that may be contributed annually to a Roth IRA is:

     a.     100% of earned income
     b.     $4,000
     c.     the greater of a or b
     d.     the lesser of a or b

     Contributions made to a Roth IRA by taxpayers whose income      exceeds the permissible levels are subject to:

     a.     confiscation by the IRS
     b.     a 6% penalty tax
     c.     a 10% penalty tax
     d.     a 50% penalty tax

     If a taxpayer contributed more than the allowable amount to a Roth IRA, the excess may be withdrawn, penalty free, at any time up to:

     a.     the end of the tax year
     b.     the taxpayer's tax filing date
     c.     the taxpayer's tax filing date plus extensions
     d.     the end of the calendar year

   Regarding the penalty tax on excess contributions to a Roth IRA, all of the following are true EXCEPT:

     a.     the penalty only applies to the year of the contribution
     b.     the penalty applies each year the contribution remains in the account
     c.     the penalty applies until the excess is withdrawn
     d.     the penalty applies until the contributor underfunds future contributions to "correct" the excess

    Distributions from a long-established Roth IRA are tax-free if they are taken from the account:

     I.     after age 59½
     II.     due to the account holder's disability
      III.     due to the account holder's death
     IV.     to pay for the first-time purchase of a primary residence

     a.     I only
     b.     II and III only
     c.     I, II and III only
     d.     I, II, III and IV

   To take a tax-free distribution from a Roth IRA, the contributions must first remain in the account for:

     a.     one tax-year
     b.     two tax-years
     c.     three tax-years
     d.     five tax-years

   If a taxpayer takes a "non-qualified" distribution from a Roth IRA, the distribution is taxable as ordinary income.  The distribution is treated, for tax purposes:

     a.     as contributions first, then earnings
     b.     as earnings first, then contributions
     c.     the same as a distribution from a non-deductible traditional IRA
     d.     the same as a distributions from a deductible traditional IRA

   The penalty on "premature withdrawals", i.e. prior to age 59½ , from a Roth IRA is:

     a.     0%
     b.     6%
     c.     10%
     d.     50%

     A 76-year old man has a Roth IRA valued at $88,000 as of January 1, 2011.  According to IRS tables, his life expectancy is 22.0 years.  If he withdrew $2,000 from the IRA during 2011, he is subject to a penalty of:

     a.     0
     b.     $1,000
     c.     $1,500
     d.     $2,000

   If a 45-year old taxpayer owns a traditional IRA and wishes to convert that IRA into a Roth IRA, she may do so:

     a.     tax free
     b.     subject to the 20% withholding tax
     c.     but must pay tax as though the traditional IRA assets were distributed, including a 10% penalty on premature withdrawals
     d.     but must pay tax as though the traditional IRA assets were distributed, but no 10% penalty for premature withdrawals