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Series 66 > Unit 24 (5) > Flashcards

Unit 24 (5) Flashcards

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Series 66 flashcards
1
Q

Similarities between IRAs and Keoughs

A
  1. Tax deferral of contributions
  2. Tax sheltered
  3. Only cash contributions. If a rollover or transfer, securities from the transfer account are permitted
  4. Distributions after 59.5 no penalty
  5. Early withdrawal penalty 10%
  6. Payouts in lump sum or periodic
  7. Upon death, payments made to beneficiary, bypass probate
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2
Q

Who can open an IRA?

A

Most individuals with earned income under the age of 70.5

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3
Q

Can you roll a qualified employer retirement plan into an IRA if you’re leaving the company?

A

Yes, as long as it’s completed within 60 days

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4
Q

What happens when spouse stays beneficiary on an inherited IRA

A

No 10% for withdrawals before 59.5 but the withdrawals must start when the deceased would have turned 70.5. RMDs are computed based on the beneficiaries age, not the deceased. Also, if its a ROTH and hadn’t been open for 5 years, still 10% penalty.

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5
Q

When can you delay a qualified retirement plan?

A

April 1 of the year after you retire

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6
Q

Non-spouse take RMDs based on oldest beneficiary life expectancy

A

Results in higher payout, higher taxes. Can be avoided if set up separate inherited IRA accounts for each account

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7
Q

Who can give a gift to a minor in a custodial account?

A

Any adult. There is no limit on the size of the gift.

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8
Q

The definition of security specifically excludes what?

A

Retirement plans

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9
Q

When must margin forms and agreements be completed?

A

Promptly after the initial margin trade.

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10
Q

Do Roths and traditional have different contribution limits?

A

No. You can contribute a total of 6k to an IRA and can be split between a traditional and Roth however you want

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11
Q

Is income on a UTMA considered earned income?

A

No. The kiddie tax rule applies where children younger than 19 with income in excess of $2,200 is taxed at a rate applicable to trusts

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12
Q

Is tax exempt income from Munis included in Adjusted Gross Income?

A

No

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13
Q

Governmental section 457 plan must be funded. What does funded mean?

A

It must hold plan assets in trusts or custodial accounts for the benefit of individual participants

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14
Q

Your married client has an AGI of 105k and is covered by his employers defined benefit pension plan. Can they open a Roth IRA?

A

Yes and without any restriction. As long as a married couples AGI does not exceed 203k, a Roth can be opened without any restrictions

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15
Q

What happens to $ that is left over in a 529?

A

If you withdraw the excess, the portion representing earnings is taxed as ordinary income, plus a 10% penalty.

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16
Q

When are you vested in a SEP?

A

Immediately. Once the money is deposited into the account, it belongs to the employee

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17
Q

Tax sheltered annuity

A

403b or TSA

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18
Q

Non-spouse cash out in 5 years

A

If deceased wasn’t 70.5, you can withdraw all the funds by Dec. 31 of the fifth year after owner’s death. Added to taxable income for beneficiary. No frequency to withdrawals. Can take some first year, wait a few years, take some more. Must take all funds by Dec 31 of 5th year

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19
Q

Who cannot benefit from real estate held in an IRA?

A

Any member of the family, even adopted children and great grandchildren. EXCEPT brother or sister

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20
Q

What are some things a prudent expert could buy as a fiduciary?

A

AAA rated debentures
Growth mutual fund
New issues of a AAA rated issuer
Writing covered calls on dividend paying stocks
Must be non-speculative, low to moderate risk, and likely to be considered prudent if used in a way consistent with MPT

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21
Q

A self employed individual who operates a Keough plan must make contributions for

A

Full time employees who are at least 21 and have worked for 1 year (1,000 hrs)

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22
Q

Roth key points

A
  1. Contributions not tax deductible
  2. Distributions tax free after 5 yrs and 59.5 age
  3. Can contribute after 70.5 if still have earned income
  4. Distributions not required at 70.5
  5. Death, disability, first time home, dist. is qualified and no 10% or tax
  6. Minor can be named beneficiary
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23
Q

You file for tax extension. When do you have to contribute to your IRA?

A

Even though you got an extension, you can still only contribute from Jan 1 to April 1

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24
Q

Which has earnings restrictions for contributors - 529 or Coverdell ?

A

Coverdell

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25
Q

At what level gift will you be subject to gift tax?

A

Over 15k

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26
Q

Can you contribute to a Roth after age 70.5?

A

Yes, as long as you still have earned income

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27
Q

IRA Contribution Limit

A

$6,000 or $7,000 for over 50

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28
Q

Holding period return

A

Income plus capital appreciation over a specific period

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29
Q

Which has higher contribution limits - Keough or IRA

A

Keough has a much higher contribution limit than IRA

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30
Q

SEP Participation

A

All eligible employees to participate

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31
Q

Simple plan

A

Retirement plan for biz with < 100 employees who earned 5k or more during the preceding year

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32
Q

Qualified plan

A

Employer sponsored plan such as a pension, 401k or 403b where the contributions are made with pretax dollars and earnings in the account grow tax deferred until withdrawal

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33
Q

Total return

A

Includes the income from dividends or interest plus any capital appreciation or minus any depreciation.
Ex. Common stock purchased at $20 with annual divvy $1 is sold one year later for $24. The total return is $5. $4 in gains plus $1 divvy. Total return 25%

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34
Q

Which has a higher contribution limit, IRA or Keough?

A

Keough is significantly higher than IRA

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35
Q

Are HSA contributions tax deductible?

A

Yes. Eligible participants can claim tax deductions on contributions

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36
Q

What does an employer have to do to qualify under ERISA section 404c?

A
  1. Employees must have individual accounts (must enjoy the benefits and risks of their decisions)
  2. Have independent control of their accounts
  3. Sufficiently broad range of options to choose from
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37
Q

In a Coverdell, can someone other than the parent/guardian be the “responsible individual”?

A

No. It must be the parent or guardian

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38
Q

RMD minimum distribution penalty

A

50% of the amount you didn’t withdraw

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39
Q

Mutual fund current return/current yield

A

Sec requires current return based on income dist. for the past 12 mo. divided by the POP. Capital gains are not included
ABC fund has a POP of $10.50 and a NAV of $10. It has made 4 $.15 distributions in the last year. And one cap gain distribution for $.25. The current yield is?
.5*4= $.60 then .60/10.50 = 5.7%

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40
Q

Qualified tax deferred retirement plan for school and non-profit employees

A

403b

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41
Q

Is an IRA ERISA qualified?

A

No because it does not involve employer contributions

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42
Q

How does a direct rollover differ from a transfer?

A

A direct rollover is one type of plan to an IRA. A transfer is IRA to IRA

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43
Q

What earnings count toward determining the max that may be contributed to a Keough?

A

Only self-employment earnings

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44
Q

4 options for inherited IRA when beneficiary is not a spouse

A
  1. Take the cash now
  2. Cash out IRA in 5 years
  3. Take RMDs during beneficiaries own life expectancy
  4. Take RMDs during life expectancy of oldest beneficiary
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45
Q

Simplified employee pension plans (SEP IRA)

A

Offer self employed persons and small business easy to administer pension plans

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46
Q

Are profit sharing and 401ks pension plans?

A

No, and as such employer contributions are not mandatory

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47
Q

Annualization factor

A

Number of months in the year divided by the number of months held.

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48
Q

Ineligible investments for an IRA

A

Collectibles, whole life insurance, term life

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49
Q

If a beneficiary of an inherited IRA is not a spouse, what are they not allowed to do?

A

Can’t rollover into their own IRA

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50
Q

457b facts

A
  1. Exempt from erisa
  2. Not required to follow non discrimination rules
  3. Tax exempt only for highly compensated employees, gov for anyone
  4. Distributions at any age and no 10% penalty
  5. You can have this as well as a 403b or a 401k and make max contribs to both
  6. Unlike 401ks, loans from 457bs are available for gov employees
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51
Q

An retiree is paid an annual amount equal to 30% of the average of his last 3 years salary. What type of plan is this?

A

Defined benefit plan. A defined benefit plan establishes the retirees payout in advance

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52
Q

In order to have matching contributions, participants in a Roth 401k must have what?

A

They must have 2 accounts. The Roth and the regular 401k. The employer contributions are made to the regular 401k

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53
Q

Ineligible investment practices for IRA

A

Shorting
Speculative options
Margin account trading

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54
Q

If a customer wants to open at UTMA or UGMA for his nephew, can the uncle make himself the custodian?

A

Yes, the donor may name himself custodian. The custodian is not required to be a legal guardian

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55
Q

When is a SEP tax deductible?

A

Employer contributions are tax deductible to the employer. Contributions are not taxable to an employee until withdrawn. Earnings accumulate tax deferred

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56
Q

You open a UTMA for each of your sons, Josh age 12 and Drake age 14. Under current regs, after deductions and exemptions, how will the income in each UTMA be taxed?

A

Each account’s income in excess of $2,200 is taxed at the rate applicable to trusts.

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57
Q

IRA contribution limit

A

$6,000 per individual or $12,000 per couple. Or 100% of taxable compensation for the taxable year.

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58
Q

Is an independent contractor eligible for a 403b?

A

No, only employees

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59
Q

How often can you rollover an IRA?

A

Once every 12 moth period

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60
Q

The uniform prudent investor law allows a fiduciary to delegate investment decisions to a third party. What would that third party not be able to do?

A

Amount and timing of distributions are not included in portfolio management and can only be done by the fiduciary (trustee)

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61
Q

What can an employer match in a SIMPLE

A

2% of employee compensation regardless of if the employee contributes
Or dollar for dollar up to 3% where only the employees who contribute will receive a match from the employer

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62
Q

Can a corporation use a Keough?

A

No

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63
Q

Earned income can be

A
  1. Wages, salaries, tips
  2. Commissions and bonuses
  3. Self employment income
  4. Alimony from pre-2019 divorce decrees
  5. Nontaxable combat pay
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64
Q

Can you roll excess money in a 529 to an IRA?

A

No. Money in a 529 is not part of a qualified plan so you can’t roll it into an IRA

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65
Q

Economic Growth and Tax Relief Reconciliation Act of 2001

A

Permits catch up contributions to IRAs if you’re over 50 above the max annual amount. Can go to traditional or roth. After 2006 its been $1,000

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66
Q

Nondeductible contribution

A

Contribution to a qualified plan or an Ira made with after tax dollars. Funds do grow tax deferred but there is no tax benefit derived from the contribution

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67
Q

What is the maximum employer share of contributions to a 401k or any deferred compensation plan?

A

May not exceed 25%

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68
Q

Once a gift is given to a minor under a UTMA, can it be reclaimed?

A

No

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69
Q

Not compensation for IRA purposes

A
  1. Capital gains
  2. Interest and dividend income
  3. Pension or annuity income
  4. Child support
  5. Passive income from DPPs
  6. Alimony from post dec 2018 divorces
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70
Q

Can a tax exempt, nongovernmental section 457 plan be funded?

A

No

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71
Q

Who is obligated for the payment of taxes in a UTMA and a UGMA?

A

The child. Even though they are usually paid by the parent or guardian, they are the responsibility of the beneficial minor

72
Q

GIC guaranteed investment contract

A

Investment option for 403b and 401k. Issued by insurance company w/gtd return of principal. Fixed rate of return higher than bank issued CD. GICs are not FDIC insured

73
Q

In what plans are employer contributions mandatory?

A

Defined benefit or defined contribution pension plans

74
Q

3 methods of IRA to IRA transfer

A

60 day rollover
Direct rollover
Trustee to trustee transfer

75
Q

What account to employer contributions go into in a Roth 401k?

A

The go into the regular 401k on a tax deductible basis and are fully taxable upon withdrawal

76
Q

Compensation for IRA purposes

A
  1. Wages, salaries, and tips
  2. Commissions and bonuses
  3. Self-employment info
  4. Alimony from pre-2019 divorces
  5. Non taxable combat
77
Q

Thomas is 49 and his wife is 51. He owns his own business and pays himself a salary of 80. His wife is a receptionist and she is paid 45k a year. What can they contribute to their IRAs?

A

Thomas can contribute 6k but his wife can contribute 7k bc she is over 50

78
Q

Does money in an HSA roll over?

A

Yes

79
Q

Does an IRA need a IPS?

A

No, the investor manages the IRA so an investment policy statement is not needed

80
Q

If your company has a SIMPLE can you have another retirement plan in place

A

No

81
Q

When during the year can you contribute to an IRA?

A

Between January 1 and April 15 for this year and the previous year. If you obtain a tax extension, the deadline is still the same.

82
Q

The prudent expert rule permits what

A

It permits a fiduciary to invest in securities a prudent investor might buy.

83
Q

What is the max amount an adult can gift to a minor?

A

There is no limit. But, anything higher than 15k will possibly subject the donor to gift tax liability.

84
Q

Current yield

A

Annual income stream divided by the current price. Be sure to check if they give you a quarterly dividend, multiply by 4

85
Q

What happens to money in an FSA if you don’t use it?

A

Use it or lose it

86
Q

What is the penalty for over contribution to an IRA

A

6% of the excess contribution if it is not removed by the time a tax return is filed. No later than April 15

87
Q

Roth IRA earnings may be withdrawn tax free if

A

Five years following the initial deposit
You are older than 59.5
$ being used for primary home purchase
Account holder has died or become disabled (only for account holder not spouse)

88
Q

Three types of IRAs

A

Traditional
Roth
Simplified Employee Pension Plan

89
Q

Qualified means

A

Pretax dollar contributions

90
Q

What type of IRAs allow tax deductions?

A

Traditional and certain SEPs. Deductibility limits are lowered for those who are eligible for a qualified employer sponsored plan.

91
Q

SEP Eligibility

A

Employee must be 21, worked 3 of last 5 years, received at least $600 in compensation in current year

92
Q

ERISA section 404c deals with what?

A

Employers fiduciary responsibility for investment decisions by employees if certain conditions are met.

93
Q

Non-spouse taking cash immediately

A

Can withdraw 100% of the inherited value immediately. Entire value included in taxable income during withdrawal year

94
Q

Withdrawals during retirement from which of the following accounts would most likely be subject to the greatest amount of taxation?

  1. Nondeductible traditional Ira
  2. Qualified variable annuity
  3. Nonqualified variable annuity
  4. Roth IRA
A

Qualified variable annuity. The entire amount of the distribution from a qualified annuity will be subject to taxation at ordinary income rates. No tax is due on the Roth, and only the earnings on the non-qualified annuity and the nondeductible Ira are taxed

95
Q

KEOGH

A

ERISA-qualified plans intended for self employed individuals and owner-employees of unincorporated business concerns or professional practices

96
Q

Is there a margin suitability form?

A

No. There is an options suitability form.

97
Q

Owner-employee

A

Sole proprietor

98
Q

Employer eligibility for a 403b must qualify as

A

Public educational 403b institution
Tax exempt 501c3
Church organization

99
Q

A pension plan administrator hires an IA to oversee the investment decisions of the plan. The advisers primary responsibility is to whom?

A

The plan.

100
Q

The safe harbor requirement relieve the trustee of a 401k of liability if:

A

The plan participants have the ability to select from three different investments and are allowed to make selection changes no less frequently than quarterly.

101
Q

IRAS and Keoughs are similar in that

A

Distributions without penalty may begin as early as 59.5
Taxes on earnings are deferred
Rollovers are allowed once every 12 months and must be completed within 60 days

102
Q

Annualized return

A

Multiplying the actual return by the annualization factor. You receive $5 on a $100 investment held for 6 months. Take $5 times the annualization factor (12/6 = 2) 5*2= 10% annualized return

103
Q

Who can give a gift to a minor in a custodial account?

A

Any adult. There is no limit on the size of the gift.

104
Q

Are contributions to a Roth tax deductible?

A

No

105
Q

What is the maximum employer share of contributions to a 401k or any deferred compensation plan?

A

May not exceed 25%

106
Q

If you have an HSA and don’t use all the funds for health expenses, what can you do with the rest of the $?

A

Funds not used for medical expenses can be invested in mutual funds and other securities

107
Q

Which of the following is considered to be a security?

  1. 403b
  2. 529
  3. Coverdell
  4. 457
A
  1. A 529 is technically considered a municipal fund security. The term security specifically excludes retirement plans
108
Q

Keough eligibility rules

A
  1. Full time employees - at least 1,000 hrs of work per year
  2. Tenured employees - 1 or more yrs continuous employment
  3. Over age 21 but not older than 70.5
109
Q

Keough plans do not include who?

A

Employees under 21 or who haven’t worked for 1 year

110
Q

When must you take your first RMD from an IRA?

A

April 1 of the year after you turn 70.5. After that year, including the year you took the delayed RMD, distributions must be made by December 31.

111
Q

Is there an income limit on those who can have a traditional IRA?

A

No

112
Q

Nonqualified

A

Employer sponsored plan such as a deferred compensation where there are no tax advantages other than the pay is not received until sometime later when the person is in a lower tax bracket

113
Q

What happens when you roll a traditional Ira into a Roth?

A

The entire amount converted is added to the investors ordinary income. There is no 10% fee if done within 60 days or if done trustee to trustee.

114
Q

Section 457b plan

A

Deferred compensation plan for gov employees and tax exempt employees.

115
Q

What is the max amount an adult can gift to a minor?

A

There is no limit. But, anything higher than 15k will possibly subject the donor to gift tax liability.

116
Q

Once a gift is given to a minor under a UTMA, can it be reclaimed?

A

No

117
Q

At what level gift will you be subject to gift tax?

A

Over 15k

118
Q

Inheriting an IRA when beneficiary is a spouse

A
  1. Do a spousal rollover. The amount of the inheritance is rolled into the spouses IRA
  2. Continue to own the IRA as a beneficiary
119
Q

Net unrealized appreciation approach when taking distribution of company stock

A

If the stock has gone up in value, when you take a distribution, you pay ordinary income tax on the cost basis and long term capital gains on the appreciation

120
Q

Section 529 plans offer a gift tax exclusion

A

Equal to 5 times the annual limit that may be repeated every 5 years

121
Q

Only case where 10% doesn’t apply for an inherited IRA withdrawal before 59.5

A

Non-spouse beneficiaries

122
Q

What can you invest in in a 403b?

A

Fixed or variable Annuities but also mutual funds

123
Q

Spousal option

A

If spouse has little or no earned income and a joint tax return is filed, a spousal IRA can be opened. Contrib limits are the same

124
Q

If a client has a child that is about to be done with college but still has $ left in their 529, what should you recommend?

A

Use the funds for graduate school or other school expenses or roll over the funds to a member of the beneficiaries family

125
Q

Employer contribution amount to a SEP

A

Employer can contribute 25% of the employees salary to a SEP Ira up to max of 56k. Must contribute the same percent for each employee and employer

126
Q

What would you most likely find in an IPS?

  1. SPD
  2. Defined benefit plan
  3. IRA
  4. GRAT
A

Defined benefit plan. The investment policy statement, although not required under dept of labor rules, is generally found in corporate qualified plans such as defined benefit or defined contribution plans

127
Q

Non-spouse beneficiary take RMDs over beneficiaries lifetime

A

Separate inherited IRA account must be established in the deceased’s name for the benefit of (FBO) the beneficiary. Withdrawals are counted as income in that year. First RMD must be taken by Dec 31 of year after death

128
Q

Can you roll money from a 529 into a Coverdell?

A

No

129
Q

What would you want to avoid in a qualified retirement plan?

A

Muni bonds. Money in a qualified plan grows tax exempt so the tax exempt status from a muni bond is lost because it isn’t actually being used

130
Q

Which of the following offers tax-deductible contributions?

  1. Payroll deduction plan
  2. Health savings account
  3. Coverdell ESA
  4. Roth IRA
A

Health savings account. In the ESA and the Roth, contributions are made with after tax dollars, but growth, and if qualified, distributions are tax free

131
Q

Substantially equal periodic payment exception

A

IRS rule 72t. If you receive IRA payments at least annually based on your life expectancy, you can withdraw before age 59.5 without the 10% penalty

132
Q

How many custodians and how many minors under a UTMA account?

A

Only one custodian and only one minor

133
Q

Adjusted gross income

A

All earned income plus other income like alimony, interest and divvys, profits from a biz you own. The subtract

  1. Trad IRA contributions
  2. Alimony paid (if divorce was prior to 2019)
  3. Self-employment tax
  4. Penalties paid on early withdrawals from savings accounts
134
Q

How many custodians and how many minors under a UTMA account?

A

Only one custodian and only one minor

135
Q

What is the key consideration in an IRA or other retirement plan?

A

Risk. These accounts seek to preserve capital first and then achieve a reasonable rate of return.

136
Q

Is there an income limit on those who can have a Roth?

A

Yes, if you make too much $ you can’t contribute to a Roth.

137
Q

Deductible contribution

A

Made by an individual to a qualified plan like a 401k or an IRA. The amount contributed is pretax or otherwise deductible on the tax return.

138
Q

If you have a Keough can you also have an IRA?

A

Yes, but if earnings limits are exceeded, the IRA contributions are not tax deductible

139
Q

Grandma Abigail died at age 82 with a trad IRA of 100k. Her daughter is 53 and the sole beneficiary. What is her option

  1. Rolling this Ira to her own Ira
  2. Take distributions spread over 5 years
  3. Take cash by Dec 31 and pay 10% since she’s < 59.5
  4. Leave Ira In name of deceased and keep taking RMDs
A
  1. Take distributions over 5 yrs. Daughter is not a spouse so can’t roll into her own IRA. Even though she is under 59.5, inheritors don’t incur 10% on withdrawals
140
Q

Earned income is not

A
  1. Capital gains
  2. Interest and dividend income
  3. Pension or annuity income
  4. Child support
  5. Passive income from DPPs
  6. Alimony from post-Dec. 31 2018 divorces
141
Q

If you make tax-deductible and non-deductible contributions to a traditional IRA, how are they taxed when withdrawn?

A

They are taxed pro-rata. So, a proportion of the pre-tax dollars are taxed separate to the proportion of the after-tax dollars

142
Q

Coverdell contribution limit

A

$2,000

143
Q

You want to contribute funds to an account for the benefit of the college education of a grandchild. Which account gives you the most control over the assets in the account?

  1. UTMA
  2. Coverdell
  3. Section 529
  4. UGMA
A
  1. 529 plan. The 529 allows the donor to take the funds back. Coverdell has the “responsible individual” as the parent or guardian. The grandparent can be a custodian of a UTMA or UGMA but that control is limited to choosing investments
144
Q

Tax deferred

A

Income tax is put off to a later time

145
Q

What can an employee contribute to a SIMPLE?

A

Up to 13k with a 3k catch up provision

146
Q

Does a SEP offer a catch up?

A

No

147
Q

A defined contribution plan is also called what

A

Money purchase plan

148
Q

403b tax advantages

A
  1. Contributions (Generally from salary reduction) excluded from gross income
  2. Earnings accumulate tax free until distribution
149
Q

A prudent investor uses

A

“Reasonable care, skill, and caution” in exactly that phrasing

150
Q

Which IRA can a minor be made a beneficiary for?

A

Roth

151
Q

Can you disclaim an inherited IRA?

A

Yes. Disclaimer must be done in writing within 9 months of death. If done, benefits pass to contingent beneficiaries. If no contingent beneficiary, will follow the orders in the deceased’s will

152
Q

You are disabled and want to take a lump sum withdrawal from your 401k. Is there a 10% and do you have to pay income taxes?

A

There is no 10% but there is income tax

153
Q

What is the age where catch ups can start?

A

Age 50

154
Q

A donor to a 529 plan has decided to move the existing plan to one offered by another state

A
  1. Unless a change of beneficiary is involved, there can only be one rollover every 12 months
  2. If there is a distribution of assets, it must be completed in 60 days
  3. Partial rollover is allowed
  4. Even though the plans are under state control, the rollover rules are federal
155
Q

Does section 404c of ERISA take employment length into consideration?

A

No

156
Q

The custodian of a UGMA or UTMA can do what but cannot do what

A

They can choose the investments but they cannot take the money back from the account. In a 529, the custodian can take funds back

157
Q

If a beneficiary to an inherited IRA does nothing as of Dec 31 the year after death, what method is used?

A

5 year withdrawal option

158
Q

What must happen for a Keough to be non-discriminatory?

A

If the business has employees, the contribution percent must be the same for owner and employee

159
Q

When rolling over a qualified plan to an IRA what must the payor of the distribution do?

A

Withhold 20% for income tax. If the employee then deposits the full original amount by making up the 20% himself in the new account, he can apply for a refund of that tax from the IRA

160
Q

Where do you generally find an IPS?

A

In a corporate qualified plan

161
Q

Is a fiduciary receiving a fee for acting as a trustee to a qualified retirement plan a conflict of interest?

A

No

162
Q

If a fiduciary for a qualified retirement plan sells a real estate investment at the current market rate to the plan, is that a conflict of interest?

A

Yes, even though it states “current market rate” it is a conflict

163
Q

Is child support deductible to the contributor or income to the receiver?

A

No in both cases

164
Q

John contributes $300 a month in alimony. Is he able to write that off?

A

Yes, he is able to deduct $3,600 from his taxable income

165
Q

If someone is unemployed but receives $3,600 a year in alimony, how much are they able to contribute to their IRA?

A

Since they are unemployed, they can contribute $3,600 to the IRA that year

166
Q

Do deferred compensation plans have to conform to ERISA?

A

No. They are non-qualified so they don’t have to comply with ERISA

167
Q

If you are in a deferred compensation plan and you leave the company or are fired before you retire, what happens?

A

You forfeit the benefits

168
Q

Is a deferred compensation plan discriminatory?

A

Yes

169
Q

Are employer contributions to a money purchase plan mandatory?

A

Yes. This is a defined contribution plan established by the employer, thereby making contributions mandatory

170
Q

Can you have a 401k and a 403b at the same time?

A

No

171
Q

If you have a 457, can you also have other retirement plans?

A

Yes. You can have other retirement plans like a 401k or a 403b

172
Q

You employ your 2 sons, age 12 and 13, in your family gardening business. They make 2k and 3k a year, respectively. What tax rate applies to them?

A

Yours. The money paid is earned income so it is not subject to the kiddie tax rules

173
Q

If you are covered by a qualified plan at work, can you have a Roth?

A

Yes

174
Q

Can distributions from a qualified plan be rolled over into a Roth

A

Yes, distributions from a qualified plan may be rolled into a Roth

175
Q

All of the following plans must set standards for vesting, eligibility, and funding except?

  1. Profit sharing plan
  2. Corporate pension plan
  3. Deferred compensation plan
  4. Keough
A

Deferred compensation. Deferred compensation plans are not qualified and can be discriminatory.

176
Q

Any investment in a qualified plan must be for what?

A

Future use. Or else it would be considered a distribution

177
Q

If you have real estate in your qualified plan or IRA, who is able to use it?

A

Only you. It can’t be used by related parties. Related parties are your spouse and lineal members of your family, ancestor or descendent of your spouse

Series 66 (22 decks)

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