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IRA Institute > CIP Practice Test > Flashcards

CIP Practice Test Flashcards

1
Q

Justin, age 49, and Kelly, age 51, are married and file a joint federal tax return. Kelly has no eligible compensation and does not participate in an employer-sponsored retirement plan. The couple has modified adjusted gross income of $177,000. Justin is an active participant in a 401(k) plan. What is the maximum amount that Kelly can deduct as a Traditional IRA spousal contribution for 2023?

A

$7,500 (Contribution for 2023 - - - - kelly is over age 50)

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2
Q

Al maintains one Traditional IRA and one Roth IRA (both of which are invested in CDs) with Organization A. His Traditional IRA balance is $180,000 and his Roth IRA balance is $75,000. What amount of FDIC or NCUA coverage does Al have?

A

$250,000

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3
Q

Alex’s Roth IRA balance is as follows.
2021 Contribution $ 6,000
2017 Conversion $12,500
Earnings $ 1,500
In 2023, Alex, age 41, took $10,000 from his Roth IRA to paint his house. What are the tax consequences of the distribution?

A

The contributions are tax-and penalty-free, the conversion assets are tax-and penalty-free.

Earnings would be subject to both tax and early withdrawal penalty, but only withdrawing $10k. Non qualified distribution because no qualified reason/under age 59 1/2

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4
Q

What are Treasury Regulations designed to do?

A

Interpret legislation that has been enacted

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5
Q

A Traditional IRA owner died three years after making his first deductible Traditional IRA contribution. What are the tax consequences if the beneficiary takes a distribution in the year of the Traditional IRA owner’s death?

A

The entire distribution is subject to taxes but not penalty taxes.

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6
Q

What is the Department of Labor’s safe harbor for the timing of SIMPLE IRA deferral deposits?

A

7 business days after the deferral

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7
Q

Paul’s Custom Painting employed 98 employees in 2022, all of whom earned $30,000 or more. Paul established a SIMPLE IRA plan for his business effective January 1, 2022. During 2023, Paul’s Custom Painting hires three employees who will each receive $40,000 in 2023. Assuming a constant workforce, what is the last year in which Paul’s Custom Painting may maintain a SIMPLE IRA plan?

A

2025

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8
Q

Scott was born July 20, 1950. When is his required beginning date?

A

April 1, 2023
(turn age 72 in 2022=April 1st year after death)
(age changed to 73 in 2023)

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9
Q

What component of the IRA opening document is designed to present IRA rules and regulations in nontechnical language?

A

Disclosure statement

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10
Q

Which of the following is a prohibited IRA investment?
A. Life insurance
B. Gold bullion
C. Racing horse
D. Mutual funds

A

A. Life Insurance

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11
Q

Ron, a Traditional IRA owner, died on August 18, 2022, at age 66. His sisters, Elizabeth, age 69, Susie, age 64, and Cheryl, age 61, were all listed as primary beneficiaries and each elected single life expectancy payments. The financial organization completed separate accounting of the beneficiaries’ amounts on June 10, 2023. How will the life expectancy payments be calculated?

A

Each beneficiary’s own single life expectancy, nonrecalculated

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12
Q

Lou, age 45, takes a $3,000 Traditional IRA distribution and is not eligible for an early distribution penalty tax exception. If $1,500 of the distribution is nontaxable because of nondeductible contributions made in previous years, how much of an early distribution penalty tax will Lou owe?

A

$150

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13
Q

Which of the following would be considered eligible compensation when determining IRA eligibility?
A. Pension income
B. Disability income
C. Social Security income
D. Tip income

A

D. Tip income

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14
Q

Stephanie, age 30, directly converted the entire balance ($40,000) of her only Traditional IRA to a new Roth IRA. The Traditional IRA consisted of deductible contributions and earnings. What are the tax and penalty implications of this conversion?

A

The entire conversion amount is taxable, but penalty free.

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15
Q

If an employer made a 2022 SIMPLE contribution on April 6, 2023, what is the deadline for the financial organization to report the contribution to the IRS on Form 5498?

A

May 31, 2024

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16
Q

What tax form does the financial organization use to report IRA contributions to the IRS?

A

Form 5498

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17
Q

Billy, age 76, named his wife Bobbie, age 60, and their son Paul, age 40, as his Traditional IRA beneficiaries. How will Billy calculate his RMD?

A

Using his life expectancy based on the Uniform Lifetime Table

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18
Q

If IRA distributions are automatically paid out monthly, how often must the financial organization provide a withholding notice?

A

Once a year

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19
Q

David and Laurie, both age 45, are married, filing a joint federal income tax return. David will receive $1,700 of eligible compensation for 2023 and Laurie will receive $4,650 of eligible compensation for 2023. Assuming Laurie does not make a 2023 IRA contribution, what is the maximum amount that may be contributed to David’s IRA for 2023?

A

$6,500 (total eligible compensation is & 6,350, this seems wrong?)

Total contribution limit for 2023 under age 50 is $6,500

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20
Q

For a conversion completed during 2023, does the IRA owner need to include the amount as income and pay taxes?

A

The IRA owner must include the conversion amount as income in 2023.

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21
Q

A Roth IRA owner, age 42, has been unemployed for 9 consecutive weeks when he takes a nonqualified distribution to pay his health insurance premiums. What are the consequences of the distribution if it includes regular contributions and earnings?

A

The earnings are taxable and subject to a 10 percent early distribution penalty tax. (TO QUALIFY FOR EARLY DISTRIBUTION PENALTY WAIVER, MUST HAVE BEEN UNEMPLOYED FOR 12 CONSECUTIVE WEEKS)

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22
Q

A Traditional IRA established & funded account on June 1, 2020. It was then rolled over to a SIMPLE IRA established July 1, 2022. Is this an eligible or ineligible rollover?

A

ineligible rollover

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23
Q

Caleb was born on August 30, 1951. He died on January 3, 2023 (age 72). Caleb’s wife Synthia, age 73, is the primary beneficiary of his Traditional IRA. She wants to elect life expectancy payments. Which of the following statements best describes the distribution required for 2023?
A. Synthia must distribute Caleb’s 2023 RMD before April 1, 2024.
B. The financial organization must distribute the 2023 RMD to Caleb’s estate before it creates a separate beneficiary account for Synthia.
C. There is no RMD due for 2023.
D. Synthia must distribute Caleb’s 2022 RMD before December 31, 2023.

A

C. There is no RMD due for 2023. Changed to age 73 in 2023

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24
Q

Which of the following individuals is not eligible for a Traditional IRA catch-up contribution? Assume each individual has earned income.
A. An individual who will attain age 45 before the end of the year
B. An individual who will attain age 50 before the end of the year
C. An individual who has attained age 59½
D. An individual who will attain age 55 before the end of the year

A

A. An individual who will attain age 45 before the end of the year

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25
Q

Zoe and Cameron are divorced. Zoe, age 51, receives alimony of $12,000 each year, from a divorce settlement in 2021. This represents her only source of taxable income. What is the maximum amount she may contribute to a Roth or Traditional IRA in 2023?

A

Zoe is not eligible to contribute to either a Traditional or Roth IRA because she doesn’t have earned income.

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26
Q

Who may rely on a private letter ruling?

A

The IRA owner who applied for the ruling

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27
Q

Which of the following amounts are NOT eligible to be rolled over to a Roth IRA?
A. Roth 401(k) contributions
B. Inherited amounts held in a 401(k) plan for a nonspouse beneficiary
C. Inherited amounts held in a Traditional IRA for a nonspouse beneficiary
D. SIMPLE IRA contributions after the 2-year period has been met

A

C. Inherited amounts held in a Traditional IRA for a nonspouse beneficiary

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28
Q

Melissa, a Roth IRA owner, died on August 13, 2023, at age 88. Her sister, Caroline, age 77, was listed as her primary beneficiary. What beneficiary options are available to Caroline?

A

10-year rule or lump sum

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29
Q

T/F: it is an IRS assumption when completing a financial disclosure for when investment growth can be accurately projected is the loss of earnings penalty, if any, must be reflected in the projection on the financial disclosure.

A

True

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30
Q

Which IRS Publication provides information on SIMPLE IRA and SEP plans?

A

Publication 560

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31
Q

Brian, owner of Brian’s Auto Body, would like to fund a SIMPLE IRA for his employees for 2023. By which date must Brian’s Auto Body make a SIMPLE IRA employer contribution?

A

SIMPLE CONTRIBUTION DUE BY Brian’s Auto Body’s tax filing due date, plus extensions (Must be ESTABLISHED by Oct 1)

32
Q

What is the penalty for failing to provide a withholding notice to an IRA owner who takes a distribution?

A

$100 per failure

33
Q

Andy is the beneficiary of his Uncle Rick’s Roth IRA. The Roth IRA was established in 2020. In 2023, Uncle Rick dies and Andy closes the Roth IRA. What distribution code will the financial organization use to complete the 2023 IRS Form 1099-R? Whose SSN & name?

A

The financial organization should enter code T on Form 1099-R, which will be generated in Andy’s name and Social Security number.

34
Q

Which of the following is NOT a required characteristic of a qualified trust?
A. The spouse must be the sole beneficiary of the trust
B. The trust must be irrevocable upon death
C. It must be valid under state law
D. The trust must have identifiable beneficiaries

A

A. The spouse must be the sole beneficiary of the trust

35
Q

Which of the following is a characteristic of catch-all amendments?
A. If you missed more than two amendments, you may not use a catch-all amendment.
B. A catch-all amendment is a full and up-to-date plan agreement only.
C. A catch-all amendment must be completed within a time frame announced by the IRS after each amendment deadline.
D. There is no guarantee that the IRS will waive penalties for past failures to amend.

A

D. There is no guarantee that the IRS will waive penalties for past failures to amend.

36
Q

Which form does an IRA owner use to waive withholding on a distribution?

A

IRS Form W-4R

37
Q

A distribution of a deceased IRA owner’s IRA assets to a spouse beneficiary in the year of death is reported to the IRS in the name and tax identification number of

A

the spouse beneficiary.

38
Q

What are the Roth IRA distribution ordering rules?

A

Contributory assets, conversion assets, earnings

39
Q

Employee deferrals made under a SAR-SEP plan are deposited into which type of IRA?

A

Traditional IRA

40
Q

Ryan, a Roth IRA owner, dies at age 82 in 2022. Ryan listed his brother Eric, age 87, as the sole primary beneficiary. Upon Ryan’s death, may Eric Roll over the assets to his own IRA?

A

NO (only available to spouse bene)

41
Q

What is the maximum MAGI that a single filer may have if she wants to make a full 2024 Roth IRA contribution?

A

$146,000 [2023 - $138,000]

42
Q

On February 10, 2023, Angela made a $6,000 Traditional IRA contribution for 2022. On April 13, 2023, Angela discovered that she is not eligible for the contribution and decided to remove the contribution, plus earnings. What form, year, and tax code will the financial organization report this distribution on?

A

2023 IRS Form 1099-R with code 8 (reported on the year MADE not FOR)

43
Q

Carrie died on December 26, 2022. The custodian of her Traditional IRA was notified of her death on July 2, 2023. Which of the following statements is true?
A. The custodian should report Carrie’s date-of-death IRA balance on a 2022 IRS Form 1099-R.
B. The custodian should report the December 31, 2022, IRA balance on a 2022 IRS Form 5498.
C. No corrective year-of-death IRS Form 5498 reporting is required for Carrie because the custodian was notified after May 31, 2023.
D. The custodian should report Carrie’s July 2, 2023, IRA balance on a 2023 IRS Form 5498.

A

C. No corrective year-of-death IRS Form 5498 reporting is required for Carrie because the custodian was notified after May 31, 2023.

44
Q

If an IRA owner delays distributing his first RMD until April 1 of the year following the year he attains RMD age, when is his subsequent RMD due?

A

D. December 31 of the same year

45
Q

What is the 2024 Traditional IRA MAGI phase-out range if a married couple files a joint federal tax return and each spouse participates in an employer-sponsored retirement plan?

A

$123,000-$143,000 [2023 $116,000-136,000]

46
Q

Which penalty tax generally applies if a Roth IRA owner contributes more than he is eligible to contribute?

A

6% of the excess amount

47
Q

To be eligible to convert, a single IRA owner’s MAGI cannot exceed

A

There is no MAGI limit for conversions

48
Q

Are Pretax Traditional IRA assets eligible to be rolled over to a qualified retirement plan?

A

Yes

49
Q

Madeline has only one Traditional IRA with a balance of $60,000. Over the years she has made both deductible and nondeductible IRA contributions. Madeline decides to convert only the nondeductible balance ($25,000) of her Traditional IRA to a Roth IRA. What portion of the conversion will be taxable?

A

Only the deductible assets are taxable.

50
Q

Are 457(f) plan assets eligible to be rolled over to a Roth IRA?

A

No

51
Q

Josh was born on May 3, 1964. He died on February 17, 2023. Sue was born on January 23, 1958. Sue is Josh’s wife and the sole primary beneficiary of his Traditional IRA. If Sue elects life expectancy payments, when must her payments begin?

A

December 31 of the year Josh would attain age 72 (2036)

  • still age = 72
52
Q

If a Traditional IRA owner, age 78, names an estate as beneficiary, what life expectancy is used to calculate the distributions following the IRA owner’s death?

A

The single life expectancy of the IRA owner

53
Q

An IRA owner filed a single income tax return for 2024. To make a full Roth IRA contribution, her MAGI cannot exceed

A

$146,000
[2023 = $138,000]

54
Q

What is the deadline for making a Roth IRA contribution?

A

The IRA owner’s tax-filing due date, not including extensions

55
Q

Which of the following would be considered eligible compensation when determining IRA eligibility?
A. Child support
B. Pension income
C. Professional fee income
D. Rental income

A

C. Professional fee income

56
Q

Jenna is a single tax filer and made a $5,000 contribution to her Roth IRA for 2023. Jenna determines she is eligible for a Saver’s Credit of 50 percent. How much is Jenna’s credit?

A

$1,000

57
Q

When is an IRA owner eligible to make a catch-up contribution?

A

A. The year the IRA owner attains age 50

58
Q

If a 57-year-old individual begins taking IRC Sec. 72(t) substantially equal periodic payments this year, how long must the distributions continue to avoid the 10 percent early distribution penalty tax?

A

A. For 5 years

59
Q

An IRA owner was born on April 26, 1963. What is the earliest date that he can take a distribution from his Traditional IRA without incurring the 10 percent early distribution penalty tax?

A

October 26, 2022

60
Q

Which of the following is a characteristic of a valid disclaimer?
A. The disclaimer must be in writing.
B. The disclaimer must be court ordered.
C. The disclaimer must be made within one year of the IRA owner’s death if the beneficiary is over age 21.
D. The disclaimant can direct who receives the assets.

A

A. The disclaimer must be in writing.

61
Q

An IRA owner is taking monthly scheduled payments from her Traditional IRA and has elected to waive withholding on the payments. In September she took an additional distribution of $8,000 and elected 15 percent withholding. What withholding rate should be applied to her subsequent monthly payments?

A

15%

62
Q

Mary began working for a doctor’s office in November 2022. Her employer maintains a calendar year SEP plan with a one-year service requirement and no minimum age requirement. Assuming that Mary will continue working for her employer, in which year is she first eligible to receive a SEP contribution?

A

2023

63
Q

Which of the following contribution formulas is permitted under a SIMPLE IRA plan?
A. Match employee deferrals dollar-for-dollar up to six percent of the employee’s compensation.
B. Make a two percent nonelective contribution to all eligible employees who have at least $5,000 in compensation for that year.
C. Match employee deferrals dollar-for-dollar up to one percent of the employee’s compensation. This option may not be used for more than three years out of a five-year period.
D. Match employee deferrals dollar-for-dollar up to two percent of an employee’s annual compensation.

A

B. Make a two percent nonelective contribution to all eligible employees who have at least $5,000 in compensation for that year.

64
Q

Can an individual roll over a SIMPLE IRA to a Traditional IRA?

A

A. Yes, but only after the SIMPLE IRA two-year participation period has been satisfied.

65
Q

Randy, age 70, converted his Traditional IRA to a new Roth IRA in 2023 and now wants to recharacterize the conversion on October 1, 2023. May he do this?

A

A. Randy may not recharacterize the conversion.

66
Q

An individual rolled over a designated Roth 401(k) account to a Roth IRA. The individual now has a designated Roth 403(b) plan. What is the process for moving the Roth IRA into the designated Roth 403(b) account?

A

The Roth IRA may not be moved to a designated Roth 403(b) account.

67
Q

Which of the following transactions is allowed?
A. Rollover from a Roth IRA to a Roth 401(k)
B. Indirect rollover of inherited amounts held in a 401(k) plan for a nonspouse beneficiary to a Roth IRA
C. Conversion of inherited amounts held in a Traditional IRA for a nonspouse beneficiary to a Roth IRA
D. Conversion of SIMPLE IRA contributions after the 2-year period has been satisfied to a Roth IRA

A

D. Conversion of SIMPLE IRA contributions after the 2-year period has been satisfied to a Roth IRA

68
Q

Fred made a $6,000 Traditional IRA contribution on August 18, 2022. On November 13, 2022, he decided to recharacterize the contribution to his Roth IRA. Fred calculated the NIA to be $13. What amount will Fred recharacterize to his Roth IRA?

A

$13

69
Q

An IRA owner requested a distribution from their Traditional IRA on September 15, 2023. The financial organization mailed the check on September 20, 2023. The IRA owner was on vacation and received the check on September 30. When is day one of the 60-day period?

A

October 1, 2023

70
Q

Nancy is leaving her employer and would like to move all of her 401(k) plan assets to her existing Traditional IRA at your financial organization. Her employer makes the check payable to her financial organization for her benefit. What type of transaction is this?

A

Direct Rollover

71
Q

T/F: An IRA owner takes a loan from his IRA. The pledged portion of the IRA is deemed distributed to the IRA owner on January 1 of the year in which the transaction occurred.

A

False (IRA owner takes loan = ceases to be an IRA January 1 in year transaction occurred)

If they had PLEDGED as SECURITY for loan, then ONLY THE AMOUNT would be deemed distributed (unless Annuity then whole IRA ceases Jan 1)

72
Q

Which of the following statement regarding IRA fees is true?
A. Administrative fees can only be paid by the IRA
B. Administrative fees can only be paid by the IRA owner
C. Sales charges can only be paid by the IRA
D. Sales charges can only be paid by the IRA owner

A

C. Sales charges can only be paid by the IRA

73
Q

Which type of trust is ultimately for the benefit of nonspouse beneficiaries?
A. Marital trust
B. Bypass trust
C. QTIP trust
D. Marital deduction trust

A

B. Bypass trust

74
Q

Lisa used her Roth IRA at ABC Financial Organization to buy Mountain Springs Diner. During 2023, the diner generated $24,000 of unrelated business taxable income. Who is responsible for filing form 990-T?

A

ABC Financial Organization

75
Q

Troy is establishing a Traditional IRA. Instead of naming his wife, Lori, as the primary beneficiary, he is naming his children Nolan and Sandy as the primary beneficiaries. Does Lori need to sign the beneficiary designation?

A

Yes, if he lives in a community property state because Lori is not the beneficiary

76
Q

Which of the following are postponed/late contributions reported in Box 13 of form 5498?
A. Qualified disaster distributions
B. Offset Loan Rollover
C. Rollover of Wrongful IRS Levy
D. Qualified Birth or Adoption Distributions
E. Qualified Reservist Distribution
F. Military Death Gratuity

A

B. Offset Loan Rollover
C. Rollover of Wrongful IRS Levy

77
Q

Which of the following are repayment contributions reported in Box 14 of form 5498?
A. Qualified disaster distributions
B. Offset Loan Rollover
C. Rollover of Wrongful IRS Levy
D. Qualified Birth or Adoption Distributions
E. Qualified Reservist Distribution
F. Military Death Gratuity

A

A. Qualified disaster distributions
D. Qualified Birth or Adoption Distributions
E. Qualified Reservist Distribution

IRA Institute (13 decks)

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