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IRA Institute > IRA Contributions > Flashcards

IRA Contributions Flashcards

1
Q

Which of these are considered eligible compensation?
a. W-2 income
b. Foreign earned income
c. Tips
d. Dividend income
e. Sales commissions
f. Nontaxable combat pay
g. Rental income
h. Pension income
i. Bonuses
j. Prior year compensation
k. Self-employment income
l. Farming income

A

a. W-2 income
c. Tips
e. Sales commissions
f. Nontaxable combat pay
i. Bonuses
k. Self-employment income
l. Farming income

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2
Q

What is the Traditional IRA regular contribution eligibility requirement?

A

Eligible compensation

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3
Q

What are the Traditional IRA spousal contribution eligibility requirements?

A
  • The couple must be married - The couple must file a joint federal tax return - The spouse must have eligible compensation
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4
Q

What are the Traditional IRA catch-up contribution eligibility requirements?

A
  • The individual must be age 50 or older by the end of the tax year of the contribution - The individual must have eligible compensation to support the contribution
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5
Q

What is the contribution limit for 2024 for an individual born June 23, 1975 (age 49)?

A

$7,000

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6
Q

What is the 2024 contribution limit for an individual born March 19,1974 (age 50)?

A

$8,000

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7
Q

At the time that a contribution is made, whose responsibility is it to determine if an individual is eligible to contribute to a Traditional IRA?

A

The IRA owner

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8
Q

Andrew participates in his employer’s profit sharing plan. His wife,Heather, participates in her employer’s retirement plan. For 2024,Andrew and Heather file a joint tax return and have a combined modified adjusted gross income (MAGI) of $132,000. Which of the following statements is TRUE?
a. Andrew cannot deduct his Traditional IRA contribution.
b. Heather can fully deduct her Traditional IRA contribution.
c. Both Andrew and Heather can make fully deductible Traditional IRA contributions.
d. Neither Andrew nor Heather can fully deduct their Traditional IRA contribution.

A

d. Neither Andrew nor Heather can fully deduct their Traditional IRA contribution.

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9
Q

Rita participates in her employer’s retirement plan. Her husband,Brian, works for an employer that offers no retirement plan. For2024, Rita and Brian file a joint tax return and have a combined modified adjusted gross income (MAGI) of $197,000. Which of the following statements is TRUE?
a. Brian cannot deduct his Traditional IRA contribution.
b. Rita can fully deduct her Traditional IRA contribution.
c. Both Rita and Brian can make fully deductible Traditional IRA contributions.
d. Brian can fully deduct his Traditional IRA contribution.

A

d. Brian can fully deduct his Traditional IRA contribution.

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10
Q

Anyone can make a contribution to a Roth IRA.

A

False – an individual must have eligible compensation and have MAGI under the limit for the year of the contribution.

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11
Q

There are no income restrictions on eligibility to make Roth IRA contributions.

A

False – the Roth IRA owner must have eligible compensation and have MAGI under the limit

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12
Q

If an IRA owner is involved in a prohibited transaction under IRC Sec. 4975, the IRA loses its tax-exempt status and the IRA owner is deemed to have received a distribution on the first day of the tax year in which the prohibited transaction occurred.

A

True

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13
Q

The Roth IRA MAGI phase-out ranges for contribution eligibility never change.

A

False – the phase-out range is indexed for cost-of-living adjustments (COLAs).

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14
Q

In addition to the IRA owner and IRA beneficiaries, disqualified persons for IRAs include:
-IRA fiduciaries (financial organization)
-ancestors of the IRA owner (parents or grandparents)
-siblings
-lineal descendants of the IRA owner (children or grandchildren)
-spouses of lineal descendants of the IRA owner (daughter/son-in-law)

A

False – siblings are not disqualified persons.

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15
Q

The deadline to make a Roth IRA contribution is the same as the deadline to make a Traditional IRA contribution.

A

True

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16
Q

Roth IRA owners are not allowed to make spousal contributions.

A

b. False – Roth IRA owners are allowed to make spousal contributions so long as they are married,filing jointly, at least one spouse has eligible compensation to support the contribution, and they are under the modified adjusted gross income (MAGI) limits.

17
Q

Married IRA owners may make Roth IRA contributions to the same Roth IRA.

A

False – they must make contributions to their own IRAs

18
Q

Sam, a 52-year-old single individual, has eligible compensation of$79,000 for 2024, and modified adjusted gross income (MAGI) of$104,000. If Sam deposits $7,000 as a Traditional IRA contribution,will the contribution be deductible?

A

Not enough information provided to determine the deductibility of the Traditional IRA contribution. (NEED TO KNOW OF HE IS AN ACTIVE PARTICIPANT-PHASE OUT IS $77K-$87K, IF NOT THEN FULLY DEDUCTIBLE)

19
Q

Lisa, age 26, is married, filing jointly. She participates in her employer’s 401(k) plan. Lisa and her husband have combined eligible compensation of $84,000 for 2024, and a combined MAGI of$126,000. If Lisa deposits $7,000 as a Traditional IRA contribution,will the contribution be deductible?

A

A portion of the $7,000 contribution will be deductible.

20
Q

Leslie, age 68, is married, filing a joint income tax return. Leslie is not an active participant, but her husband participates in his employer’s profit-sharing plan. For 2024, Leslie and her husband have combined eligible compensation of $123,000, and combined MAGI of $135,000. If Leslie deposits $8,000 as a Traditional IRA contribution, will the contribution be deductible?

A

Yes, the $8,000 contribution will be deductible.
Married, joint, spouse active participant phase out is $230,000-$240,000

21
Q

Greg, age 32 and single, participates in his employer’s retirement plan. For 2024, he has eligible compensation of $81,000 and MAGIof $88,000. If Greg deposits $7,000 as a Traditional IRA contribution, will the contribution be deductible?

A

No, the contribution is not deductible.
Single deductibility phase out range is $77,000-$87,000

22
Q

Which IRS form is used to report Roth and Traditional IRA contributions to the IRS and to the IRA owner?

A

Form 5498

23
Q

Which box on IRS Form 5498 is used to report the IRA type?

A

Box 7

24
Q

Which box on IRS Form 5498 is used to report the Traditional IRA regular contribution?

A

Box 1

25
Q

Which box on IRS Form 5498 is used to report the Roth IRA regular contribution?

A

Box 10

26
Q

Which box on IRS Form 5498 is used to report the fair market value?

A

Box 5

27
Q

Mary’s IRA purchases 1,000 shares of stock in a golf course business so that she may receive a lifetime country club membership. This is a prohibited transaction.

A

True

28
Q

George’s IRA purchases 50 percent ownership in his son’s new business. This is a prohibited transaction.

A

True

29
Q

Peter’s IRA purchases interest in a corporation that owns rental properties. This is a prohibited transaction.

A

False

IRA Institute (13 decks)

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