1. Regarding the 10% early distribution penalty, which statement is FALSE?
a. It applies to distributing the contributions of a Roth IRA.
b. It does not apply due to death of the participant.
c. It does not apply because of disability or medical expenses.
d. It is imposed if a distribution is made from a plan or IRA before attaining age 59
2. Mark, age 39, converted $20,000 from his traditional IRA to a Roth IRA this year. Which one of the following describes the income tax consequences of his action?
a. Because the amount converted is under the $100,000 modified AGI limit, no income tax is due on the conversion.
b. Because he is under 59 1/2, the $20,000 will be subject to a 10% early withdrawal penalty as well as ordinary income tax.
c. The $20,000 will be subject to ordinary income tax.
d. The funds converted were held for more than one year, the $20,000 will be subject to long-term capital gains tax.
3. Ramon, age 35, has a traditional IRA. Which one of the following is Ramon NOT allowed to do?
a. Take a loan from the IRA assets.
b. Withdraw money from the account under any circumstances.
c. Roll the money over into another IRA.
d. Invest in stocks.
4. Simon has a traditional IRA from which he plans to take his first retirement distribution. The account has a 10% basis (after-tax contributions). How is his distribution taxed?
. 10% of the distribution is tax-free.
b. Basis is distributed first, so no tax unless the distribution is greater than the basis.a
c. Basis distribution is deferred, so all of the distribution is taxed today and the basis is distributed tax-free at a later date.
d. 90% of the distribution is tax-free.
5. Which one of the following is true for Roth IRAs?
a. Taxpayers with adjusted gross income (AGI) of $193,000 or less can contribute.
b. They can be established by anyone with compensation regardless of age.
c. When distributions are made, earnings are paid out first, then contributions.
d. They have different maximum contribution limits, prohibited transaction rules, excess contribution rules, and operation requirements from regular IRAs.
6. Alex and Emily are married and both in their late 20s. Emily has been unemployed for all of this year, while Alex has earnings of $45,000 at his place of employment where he participates in the company profit-sharing plan. If they file a joint tax return, how much can they contribute to an IRA for each of them?
a. Up to $5,000 each.
b. Up to $5,000 for Alex and up to $2,750 for Emily.
c. Up to $5,000 for Alex only.
d. Up to $5,000 in total for the two of them, divided any way they wish between them.
7. Mark, age 39, converted $20,000 from his traditional IRA to a Roth IRA this year. Which one of the following describes the income tax consequences of his action?
a. Because the amount converted is under the $100,000 modified AGI limit, no income tax is due on the conversion.
b. Because he is under 59 1/2, the $20,000 will be subject to a 10% early withdrawal penalty as well as ordinary income tax.
c. The $20,000 will be subject to ordinary income tax.
d. The funds converted were held for more than one year, the $20,000 will be subject to long-term capital gains tax.
8. Ramon, age 35, has a traditional IRA. Which one of the following is Ramon NOT allowed to do?
a. Take a loan from the IRA assets.
b. Withdraw money from the account under any circumstances.
c. Roll the money over into another IRA.
d. Invest in stocks.
9. Simon has a traditional IRA from which he plans to take his first retirement distribution. The account has a 10% basis (after-tax contributions). How is his distribution taxed?
a. 10% of the distribution is tax-free.
b. Basis is distributed first, so no tax unless the distribution is greater than the basis.
c. Basis distribution is deferred, so all of the distribution is taxed today and the basis is distributed tax-free at a later date.
d. 90% of the distribution is tax-free.
10. Which one of the following is true for Roth IRAs?
a. Taxpayers with adjusted gross income (AGI) of $193,000 or less can contribute.
b. They can be established by anyone with compensation regardless of age.
c. When distributions are made, earnings are paid out first, then contributions.
d. They have different maximum
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