Series 65: Unit 18 Exam

Each of the following individuals is eligible to participate in a Keogh plan except A. a self-employed doctor in private practice. B. a securities analyst employed by a major research organization who makes $2,000 giving lectures in his spare time. C. an executive of a corporation who receives $5,000 in stock options from his company. D. an engineer employed by a corporation who earns $5,000 making public speeches in her spare time.

An executive of a corporation who receives $5,000 in stock options from his company

All of the following statements regarding 529 plans are true except A. contributions are made with pretax dollars at the federal level. B. the beneficiary of a 529 plan may also be the beneficiary of a Coverdell Education Savings Account. C. anyone can make a contribution on behalf of a beneficiary. D. earnings accumulate tax free if the money is used for qualified educational purposes.

Contributions are made w/ pretax dollars at the federal level

Which of the following offers the benefit of tax-deductible contributions? A. Health savings account (HSA) B. Payroll deduction plan C. Coverdell Education Savings Account (ESA) D. Roth IRA

Heath savings account (HSA)

Assuming all withdrawals are equal, which of the following would subject a 60-year-old investor to the least amount of tax? A. Roth IRA B. 403(b) plan C. Traditional IRA D. Nonqualified variable annuity

Roth IRA

One of your customers passed away recently. The customer had an IRA with you and had his sister listed as the beneficiary. Other assets included the home and furnishings and a brokerage account at another firm. The titling on that brokerage account was the customer and his son, JTWROS. The customer's will specified that 100% of his assets should pass to his daughter. Based on this information, the estate settlement will have A. the daughter receiving everything as stated in the will. B. the daughter getting the home and furnishings and the IRA, with the son receiving the brokerage account. C. the daughter getting the home and furnishings, the son receiving the brokerage account, and the sister getting the IRA. D. the daughter getting the home and furnishings and the brokerage account, with the sister receiving the IRA.

The daughter getting the home and furnishings, the son receiving the brokerage account, and the sister getting the IRA

All of these are reasons a corporation might choose to establish a nonqualified plan rather than a qualified plan except A. a nonqualified plan has more design flexibility than a qualified plan. B. a nonqualified plan typically has lower administrative costs. C. the employer can take a tax deduction at the time the contribution is made to the plan. D. the corporation can exclude rank-and-file employees from a nonqualified plan.

The employer can take a tax deduction at the time the contribution is made to the plan

Which of the following has a use it or lose it provision? A. ESA B. IRA C. HSA D. FSA

FSA

Withdrawals during retirement from which of the following accounts would most likely be subject to the greatest amount of taxation? A. Nondeductible traditional IRA B. Roth IRA C. Nonqualified variable annuity D. Qualified variable annuity

Qualified variable annuity

If your customer works as a nurse in a public school and wants to know more about participating in the school's 403(b) plan, it would be accurate to make each of the following statements except A. distributions before age 59½ are typically subject to penalty. B. she is not eligible to participate. C. contributions are made with pretax dollars. D. mutual funds and annuities are available investment vehicles.

She isn't eligible to participate

In almost all states, the Uniform Gift to Minors Act (UGMA) account has given way to the Uniform Transfers to Minors Act (UTMA) account. Although there are more similarities than differences between them, one of those differences is that A. some states permit transfer of ownership in UTMA accounts to be delayed beyond the age of majority. B. the account is in the name of the minor in an UTMA account. C. there is more investment flexibility in the UGMA account. D. the donor retains control over the investments with an UTMA account.

Some states permit transfer of ownership in UTMA accounts to be delayed beyond the age of majority

When a corporation establishes a qualified money purchase plan, A. discrimination in favor of lower-compensated employees is encouraged. B. the employee is obligated to make annual contributions at the rate stated in the plan. C. the corporation can adjust the contribution rate based on company profits. D. the corporation is obligated to make annual contributions at the rate stated in the plan.

The corporation is obligated to make annual contributions at the rate stated in the plan

All of the following statements regarding qualified corporate retirement plans are true except A. all qualified retirement plans are either defined contribution or defined benefit plans. B. all corporate pension and profit-sharing plans must be established under a trust agreement. C. with defined benefit plans, the employee bears the investment risk. D. defined contribution plans have the same contribution limits as Keogh plans.

With defined benefit plans, the employee bears the investment risk

Which of the following may be purchased in an UTMA but not an UGMA? A. Bank CDs B. Mutual funds C. Real estate D. Individual stocks

Real estate

A 40-year-old teacher in the local public school system would find her retirement needs best served by contributing to A. a 401(k). B. a traditional IRA. C. a 403(b). D. a Roth IRA.

A 403(b)

Which of the following is not an example of a nonqualified retirement plan? A. A payroll deduction plan B. A SIMPLE plan C. A SERP D. A deferred compensation plan

A SIMPLE plan

Which of the following retirement plans would be appropriate for a highly compensated government employee? A. 401(k) B. IRA C. 403(b) D. 457(b)

457(b)

Under the Uniform Gift to Minors Act (UGMA), all of the following are permissible except A. the donor and the custodian being the same person. B. gifts of cash to a minor. C. the purchase of securities on margin. D. gifts of securities to a minor.

The purchase of securities on margin

An individual has a substantial vested interest in his 401(k) plan at work. Which of the following is not an exception to the premature distribution penalty tax? A. Distribution to pay certain medical expenses B. Distribution made pursuant to a qualified domestic relations order C. Distribution of up to $10,000 made to purchase a principal residence D. Distribution because of an employee's death or disability

Distribution of up to $10,000 made to purchase a principal residence

Which of the following is not true concerning a Coverdell Education Savings Account (ESA)? A. In order for the withdrawal to be considered qualified, it may be used only for postsecondary education expenses. B. A beneficiary's unused balance may be rolled over to an ESA account for another child. C. The beneficiary may be the contributor's child or grandchild or the child of a friend of the contributor. D. The maximum contribution is $2,000 per beneficiary.

In order for the withdrawal to be considered qualified, it may be used only for postsecondary education expenses

Those individuals who are considered parties in interest due to handling the assets of a corporate retirement plans are A. encouraged to use plan funds to assist the employer when there is a cash flow crisis. B. not considered to have a fiduciary responsibility. C. able to sell personal securities to the plan if that will benefit plan participants. D. not permitted to use those funds to acquire company assets in an amount beyond the allowable limits.

Not permitted to use those funds to acquire company assets in an amount beyond the allowable limits

If the administrator of a corporate 401(k) plan ensures that a wide variety of investment alternatives are available to employees along with the ability for the employees to monitor their accounts and make frequent changes as needed, ERISA A. removes the requirement for top-heavy testing. B. shifts the responsibility for account performance to the employee. C. removes the requirement for the plan to provide employees with quarterly reports. D. might find the administrator to be shirking his fiduciary responsibility.

Shifts the responsibility for account performance to the employee

Which of the following is a benefit to an employee of a business offering a safe harbor 401(k) using a nonelective formula? A. The plan is free from the top-heavy testing requirements. B. The employer is required to contribute on the employee's behalf even if the employee does not contribute to the plan. C. The employees are guaranteed the ability to consult an investment adviser. D. It guarantees that highly compensated employees do not get more of an employer match than employees who are not highly compensated.

The employer is required to contribute on the employee's behalf even if the employee does not contribute to the plan

All of the following are advantages of a 401(k) plan except A. the employer may make unlimited contributions, which generate unlimited tax deductions for the business. B. tax deferral on the plan earnings is advantageous to employees. C. the owner of the business may participate in the plan. D. employees and the business may reduce current taxes.

The employer may make unlimited contributions, which generate unlimited tax deductions for the business

All of the following statements regarding 529 plans are true except A. eligibility is affected by the income level of the contributor. B. the assets in the account are controlled by the account owner, not the child. C. states impose very high overall contribution limits. D. contributions to a 529 plan may be subject to gift taxation.

Eligibility is affected by the income level of the contributor

Your client, who has not yet attained the age of 59½, wants to take a withdrawal from his traditional IRA. Since the client is not disabled and does not meet any other qualifying reason allowing for an early withdrawal, you explain that the amount taken will be subject to a penalty of A. 15%. B. 6%. C. 50%. D. 10%.

10%

Martha passed away in November 2020 at the age of 87. Among the assets in her estate was an IRA with a value of $150,000. Martha's son, Jerome, a successful 52-year-old surgeon and a client of yours, was named as the beneficiary of the IRA. From a tax standpoint, which of the following options would you recommend to Jerome? A. Jerome should use the 10-year cash-out option. B. Jerome should take the cash now and use a Section 1035 exchange into an annuity. C. Jerome should use the five-year cash-out option. D. Jerome should take the cash now and use the money to fund a new IRA.

Jerome should use the 10-year cash-out option

Jill's bank, where she has her traditional deductible contributory IRA, is recommending that she roll over her IRA into a Roth IRA to benefit from the tax-free status of the withdrawals when she retires. (Jill is now 32 years old.) Which of the following is a consequence if Jill follows the bank's recommendations? A. The entire amount rolled over must be declared as income. B. The amount attributable to growth must be declared as income. C. Rolling over a traditional IRA to a Roth IRA will negate the tax-free status of future withdrawals. D. No tax will occur, provided the rollover is completed within 60 days.

The entire amount rolled over must be declared as income

In many cases, the exceptions from the early-distribution tax penalty of 10% are the same for both IRAs and qualified plans. However, a specific exception granted to those with qualified plans that is not available to IRA owners is distributions A. used for higher education expenses. B. for certain medical expenses. C. under a QDRO. D. for a first-time home purchase.

Under a QDRO