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Individual Retirement Accounts

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 1. 

For tax year 2011, an IRA can be established anytime between:
a.
April 15, 2011  and  April 15, 2012
b.
January 1, 2011 and December 31, 2011
c.
January 1, 2011 and April 15, 2012
d.
April 15, 2011 and December 31, 2011
 

 2. 

Mary Jackson, age 52, works part-time at a local department store during the Christmas season.  She earned $2,500. She has no other earnings.   How much may she may contribute to an IRA?
a.
0
b.
$2,000
c.
$2,500
d.
$3,000
 

 3. 

Dr. Knight,  a retired dentist aged 73, earned $6,500 speaking at a seminar.  How much may he contribute to a traditional IRA?
a.
0
b.
$4,000
c.
$5,000
d.
$6,500
 

 4. 

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.
$6,500
 

 5. 

John and Mary Smith report joint taxable income of $120,500.  John, age 62, earns $115,500.  He is covered by his company's  pension plan.  Mary  works part-time as a secretary for her church. She earned $5,000.  
a.
any contribution to John’s IRA is deductible
b.
any contribution to Mary’s IRA is deductible
c.
any contribution to John or Mary’s IRA is deductible
d.
any contribution to John or Mary’s IRA is non-deductible
 

 6. 

John Morgan, 47-year old a single taxpayer, has worked for XYZ Corporation for two years, earning $95,000 per year.  XYZ offers a qualified pension plan.  John's pension benefits will be fully vested next year.  For 2011, John may:
a.
contribute $5,000 to a non-deductible IRA
b.
contribute $5,000 to a deductible IRA
c.
contribute $5,000 to an IRA, of which $1,250 is deductible
d.
not contribute to an IRA
 

 7. 

All of the following are acceptable investments in an Individual Retirement Account EXCEPT:
a.
preferred stocks
b.
zero coupon bonds
c.
variable annuity contracts
d.
term life insurance policy
 

 8. 

Who may withdraw funds from an IRA?
a.
a 47-year old woman
b.
a 53-year old permanently disabled man
c.
the beneficiary of an IRA upon the death of  the account holder
d.
all of the above
 

 9. 

Withdrawals may be taken, penalty-free, from a traditional IRA prior to age 59½ under all of the following circumstances EXCEPT:
a.
the account holder is disabled
b.
the account holder is deceased
c.
equal payments are scheduled for a lifetime
d.
due to financial hardship
 

 10. 

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
 

 11. 

Which of the following are true?
a.
those over age 70½ may establish a Roth IRA
b.
those over age  70½ may contribute to a Roth IRA
c.
those over age 70½  may rollover IRA assets
d.
all of the above
 

 12. 

Which of the following may NOT contribute to any IRA this year?
a.
Mr. Able, a 69-year old single taxpayer earning $75,000
b.
Ms. Bravo, a 79-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 $140,000
 

 13. 

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
 

 14. 

Distributions from a Roth IRA are tax-free if they are taken from the account:
a.
due to the account holder's disability
b.
due to the account holder's death
c.
to pay for the first-time purchase of a primary residence
d.
any of the above if the account has been open for at least 5 tax years
 

 15. 

Non-qualified Roth IRA distributions are taxable as ordinary income.  These distributions are  treated:
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
 

 16. 

A 74-year old man has a Roth IRA valued at $66,000 as of January 1, 2011.  According to IRS tables, his life expectancy is 13.2 years.  If he withdrew $3,000 from the IRA during 2007, he is subject to a penalty of:
a.
0
b.
$1,000
c.
$1,500
d.
$2,000
 

 17. 

The maximum amount that may be contributed to a SEP on behalf of an employee is:
a.
$40,000 (adjusted for inflation)
b.
25% of compensation
c.
the greater of a or b
d.
the lesser of a or b
 

 18. 

An employer may establish a Model SEP if the employer:
a.
integrates SEP contributions with Social Security
b.
currently maintains a profit sharing plan
c.
terminates any existing defined benefit qualified plan
d.
establishes IRAs for all eligible employees
 

 19. 

In the case of self-employed individuals who establish a SEP, the contribution limits are based on:
a.
gross revenues
b.
net income before deducting the SEP contribution
c.
net income after deducting the SEP contribution
d.
gross revenues after deducting the SEP contribution
 

 20. 

Contributions to a SEP-IRA must be made no later than the:
a.
end of the calendar year
b.
the end of the employer's tax year
c.
the employer's tax filing date
d.
the employer's tax filing date plus extensions
 

 21. 

When counting employees who are "eligible" for a SIMPLE plan, the employer must count:
a.
only those employees who have one year of service and are age 21 or older
b.
only those employees who may make contributions to the plan
c.
only those employees not covered by a collective bargaining agreement
d.
all employees who worked for the employer during the year
 

 22. 

If an employer adopts the most strict participation rules for a SIMPLE plan, who may  contribute to the plan?
a.
all eligible employees may participate
b.
eligible employees who earned at least $5,000 from the employer this year
c.
eligible employees who earned at least $5,000 from the employer in the past two years
d.
eligible employees who earned at least $5,000 from the employer in any of the past 2 years
 

 23. 

Employees may terminate participation, i.e. elective deferrals, in a  SIMPLE plan:
a.
only on the election date
b.
by giving notice within 10 days of the election date
c.
by giving notice within 60 days of the election date
d.
at any time
 

 24. 

Employers may deposit their matching or non-elective contributions into the SIMPLE IRA plan:
a.
as soon as is reasonably possible
b.
by the 30th day after the end of the month in which the employee would have otherwise received the deferral in cash
c.
by the end of the employer's tax year
d.
by the filing date of the employer's tax return
 

 25. 

All contributions to a SIMPLE IRA plan must vest no slower than:
a.
three-year cliff vesting
b.
five-year cliff vesting
c.
three-to-seven year graded vesting
d.
immediately
 

 26. 

For an investor in the 28% tax bracket, a contribution of $5,000 to a deductible IRA results in an immediate tax savings of:
a.
0
b.
$140
c.
$560
d.
$1,400
 

 27. 

The Internal Revenue Service will tax income in a traditional IRA when it is:
   I.   earned in the account
   II.   transferred from one custodian to another
   III.   rolled over from one custodian to another
   IV.   withdrawn from the account
a.
I only
b.
IV only
c.
II and III only
d.
I, II and III only
 

 28. 

All of the following are considered "earned income" EXCEPT:
a.
wages
b.
salary
c.
dividends
d.
commissions
 

 29. 

Mary Jackson, age 52, works part-time at a local department store during the Christmas season.  She earned $2,500. She has no other earnings.   How much may she may contribute to an IRA?
a.
0
b.
$2,000
c.
$2,500
d.
$3,000
 

 30. 

Bunker Hunt, age 53, established an Individual Retirement Account with fully deductible contributions.  He withdraws $10,000 from his IRA , buys an airline ticket to Monte Carlo, plays roulette, winning $100,000, and returns home a week later.      He then redeposits $10,000 into an IRA.  Which of the following is true?
a.
The withdrawal is fully taxable as capital gains.
b.
The withdrawal is fully taxable as ordinary income and subject to a 10% penalty.
c.
Only the earnings portion of the withdrawal is taxable as ordinary income.
d.
There is no tax consequence to the withdrawal.
 

 31. 

Which of the following is an example of an IRA rollover:
a.
movement of IRA assets directly from a bank custodian to a brokerage firm custodian
b.
movement of pension plan assets from the plan's trustee to an IRA custodian
c.
withdrawal of IRA assets from a bank custodian and subsequent deposit with a brokerage firm custodian
d.
movement of assets from a Keogh plan's trustee to an IRA custodian
 

 32. 

Robert Cratchet, age 65, is retiring.  He elects to receive $175,000 as a lump sum distribution from his employer's pension plan.  Which of the following is a reason for rolling over the lump sum into an IRA?
a.
to eliminate taxes on the distribution
b.
to delay taxes on the distribution
c.
to receive current income from the IRA
d.
federal law requires rollover of lump sum distributions into an IRA
 

 33. 

Which of the following investments is permitted in an IRA?
a.
stamp collection
b.
limited edition lithographs
c.
US Gold Eagle coins
d.
Canadian Maple Leaf gold coins
 

 34. 

All of the following mutual funds would be suitable for a conservative IRA investor EXCEPT:
a.
mutual funds investing in corporate bonds
b.
mutual funds investing in utility stocks
c.
mutual funds investing in US government bonds
d.
mutual funds investing in municipal bonds
 

 35. 

Investors concerned with the effects of inflation would most likely invest their IRA assets in:
a.
corporate bond mutual fund
b.
zero coupon bonds
c.
mutual fund investing in utility stocks
d.
mutual fund investing in growth stocks
 

 36. 

Due to financial hardship, Mr. Johnson, age 46, withdraws $5,000 from his IRA.  He is in the 28% tax bracket.  On the withdrawal, he must pay:
a.
$500 penalty
b.
$1,400 in taxes
c.
$1,400 in taxes and a $500 penalty
d.
$2,500 penalty
 

 37. 

Which of the following may withdraw funds from an IRA?

    I.    a 47-year old woman
    II.    a 53-year old permanently disabled man
    III.    a beneficiary upon the death of an IRA account holder
    IV.    a 74-year old man
a.
II and III only
b.
III and IV only
c.
I, II and IV only
d.
I, II, III and IV
 

 38. 

Which of the following may withdraw funds from a traditional IRA without penalty?

    I.    a 47-year old woman
    II.    a 53-year old permanently disabled man
    III.    a beneficiary upon the death an IRA account holder
    IV.    a 74-year old man
a.
I and II only
b.
III and IV only
c.
II, III and IV only
d.
I, II, III and IV
 

 39. 

Roth IRAs are sometimes called:
a.
SEP IRAs
b.
SIMPLE IRAs
c.
backloaded IRAs
d.
nondeductible IRAs
 

 40. 

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
 

 41. 

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
 

 42. 

Distributions from a SEP-IRA must begin no later than:
a.
retirement
b.
plan termination
c.
age 59½
d.
age 70½
 



 
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