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Exam 13: Retirement Savings and Deferred Compensation

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Question 81

Multiple Choice

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Kathy is 60 years of age and self-employed. During 2020 she reported $512,000 of revenues and $106,000 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 SEP IRA for 2020?Assume she pays $27,600 in self-employment for 2020. (Round your final answer to the nearest whole number.)

A) $57,000.
B) $63,500.
C) $78,440.
D) $378,400.

E) A) and B)
F) All of the above

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Question 82

Multiple Choice

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Which of the following is not a self-employed retirement account?

A) SEP IRA.
B) SERA 403(c) .
C) Individual 401(k) .
D) None of the choices are correct. All of these choices are self-employed retirement accounts.

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

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Question 83

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Retired taxpayers over 59½ years of age at the end of the year must receiverequired minimum distributions from defined contribution plans or they are subject to a penalty.

Which of the following statements regarding defined contribution plans is false?

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

Taxpayers never pay tax on the earnings of a traditional 401(k)account.

Which of the following describes a defined benefit plan?

Kathy is 60 years of age and self-employed. During 2020, she reported $500,000 of revenues and $100,000 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 an individual 401(k) for 2020? Assume she pays $27,787 in self-employment for 2020. (Round your final answer to the nearest whole number.)

Dean has earned $73,250 annually for the past six years working as an architect for WCC Incorporated Under WCC's defined benefit plan (which uses a seven-year graded vesting schedule) employees earn a benefit equal to 4.0 percent of the average of their three highest annual salaries for every full year of service with WCC. Dean has worked for six full years for WCC and his vesting percentage is 80 percent. What is Dean's vested benefit (or annual retirement benefit he has earned so far) ?

Tatia, age 38, has made deductible contributions to her traditional IRA over the past few years. When her account balance was $30,000, she received a distribution of the entire $30,000 balance of her traditional IRA. She retained $5,000 of the distribution to help her pay the taxes due from the distribution and she immediately contributed the remaining $25,000 to a Roth IRA. What amount of tax and early distribution penalty is she required to pay on the $30,000 distribution from the traditional IRA if her marginal tax rate is 25 percent?

Amy is single. During 2020, 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?

Kathy is 60 years of age and self-employed. During 2020 she reported $500,000 of revenues and $100,000 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 SEP IRA for 2020?Assume she pays $27,787 in self-employment for 2020. (Round your final answer to the nearest whole number.)

Darren is eligible to contribute to a traditional 401(k)in 2020. He forgot to contribute before year-end. If he contributes before April 15, 2021, he is allowed to treat the contribution as though he made it during 2020.

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

Heidi (age 57)invested $4,000 in her Roth 401(k)on January 1, 2012. This was her only contribution to the account. On July 1, 2020, when the account balance was $6,000, she received a nonqualified distribution of $4,500 (not a coronavirus-related distribution). What is the taxable portion of the distribution and what amount of early distribution penalty will Heidi be required to pay on the distribution?

Sean (age 71 at end of 2020)retired five years ago. The balance in his 401(k)account on December 31, 2019, was $1,720,000 and the balance in his account on December 31, 2020, was $1,775,000. Using the Treasury table below, what is Sean's required minimum distribution for 2020?

Sean (age 70 at end of 2020)retired five years ago. The balance in his 401(k)account on December 31, 2019, was $2,080,000 and the balance in his account on December 31, 2020, was $2,140,000. In 2020, Sean received a distribution of $60,000 from his 401(k)account. Assuming Sean's marginal tax rate is 25 percent, what amount of the $60,000 distribution will Sean have left after paying income tax on the distribution and paying any minimum distribution penalties (use the Treasury table below in determining the required minimum distribution penalty, if any).