FHCE 4210 Unit 6 quiz

Which of the following retirement plans generally have loan provisions? Section 403(b). Section 401(k) plans. Defined benefit pension plans. Money purchase pension plans 3 and 4. 1, 2 and 3. 1 and 2. 1, 2, 3 and 4.

C

If Marian receives a distribution of $180,000 during 2018, how much in penalties, if any, will she be required to pay on her 2018 tax return, assuming she files her 2018 tax return on January 15, 2019? A. $0 B. $1,241 C. $4,340 D. $13,774

A

Required minimum distributions from a qualified plan must be calculated using the Uniform Lifetime Table in all cases EXCEPT: Question 7 options: when the designated beneficiary is the participant's spouse and the spouse is more than 10 years younger than the participant. when there is more than one designated beneficiary. when there is no designated beneficiary. when the designated beneficiary is a child under the age of 16.

A

Which of the following descriptions of a regular rollover from a qualified plan to a traditional IRA is CORRECT? Mandatory withholding of 20% for federal income tax applies in the event of the employee-participant's physical possession of the amount rolled over. It generally must be completed within 90 days of the date of distribution from the previous plan. The rollover amount to the IRA is limited to $5,500 (2018). Amounts rolled over are taxable according to rules governing the source of contribution.

A

A lump-sum distribution made from a qualified plan may be eligible for the following favorable tax treatments EXCEPT A. 10-year forward averaging for individuals born before January 2, 1936 B. 5-year forward averaging for individuals born before January 2, 1936 C. capital gains treatment on the portion of distribution allocable to pre-1974 contributions D. NUA on employer securities portion of distribution

B

Mike participates in a Section 401(k) plan maintained by his employer. His vested account balance is $18,000, and he has not taken any plan loans. What is the maximum loan amount Mike can take from his Section 401(k) plan? Question 11 options: $9,000. $10,000. $18,000 $0.

B

Allison retired five years ago. She will be 70 years old on February 28, 2018. When must Allison begin taking distributions from her Section 401(k) plan? Question 17 options: April 1, 2018. December 31, 2019. December 31, 2018. April 1, 2019.

D

Required minimum distributions from a traditional IRA must begin no later than: Question 6 options: age 59½. he year in which the IRA owner attains age 70½. December 31 of the year following the IRA owner's attainment of age 70½. April 1 of the year following the year in which the IRA owner attains age 70½.

D

A required minimum distribution payment may be eligible for rollover treatment. T/F

F

Distributions from qualified plans, SEP plans, SIMPLE plans, and Section 403(b) annuities may qualify for special lump-sum distribution tax treatment. T/F

F

A partial distribution from a qualified plan directly to the participant is subject to the mandatory 20% withholding. T/F

T

Distributions from a qualified plan (except life insurance distributions) or from an individual retirement arrangement can be made on a tax-free basis if the distribution is reinvested within 60 days in an IRA. T/F

T

The premature distribution penalty does NOT apply to which of the following qualified plan distribution that is part of a series of substantially equal periodic payments made at least annually over the life or life expectancy of the participant. T/F

T

Under the IRA minimum distribution rules, if the IRA account owner dies before distribution payments begin the beneficiary can begin receiving distributions based on the beneficiary's individual life expectancy. T/F

T

The 20% mandatory withholding requirement applies to distributions from IRAs. T/F

false

Funds from qualified pension, profit-sharing, stock bonus, Section 401(k), Section 403(b), and Section 457 plans can be converted to a Roth IRA. T/F

true

Steve retired from ABC Corporation this year and received a lump sum distribution from ABC's qualified retirement plan. The distribution consisted entirely of ABC stock valued at $200,000 on the date of distribution. The fair market value of the stock at the time of contribution to the plan was $80,000. Assuming Steve does not sell the stock this year, what amount is included in Steve's gross income this year as a result of the distribution? Question 8 options: $80,000. $120,000. $200,000. $0.

A

Under the required minimum distribution (RMD) rules for IRAs, a penalty tax of: Question 10 options: 50% is assessed on the amount of required minimum distribution not taken before the required date. 50% is assessed on excess distributions. 10% is assessed on the amount of required minimum distribution not taken before the required beginning date. 10% is assessed on excess distributions.

A

Charles was an employee of ABC Corporation for 20 years. He received a lump sum distribution from his qualified retirement plan this year. The distribution was comprised entirely of ABC stock valued at $100,000 on the date of distribution. The value of the stock contributed to Charles's individual account in the plan over the years was $70,000. If Charles does not sell the stock this year, what amount is included in his gross income this year as a result of the distribution? Question 15 options: $100,000. $70,000. $0. $30,000.

B

David, who turned age 70½ on June 30, 2018, owns 10% of BCB Company. He has accumulated $5 million in BCB's stock bonus plan as of December 31, 2017 and $5.5 million as of December 31, 2018. The uniform lifetime table distribution factor for age 71 is 26.5. If David receives a distribution of $180,000 during 2018, how much in penalties will he be required to pay for 2018? Question 20 options: $868. $0. $8,679. $4,340.

B

Retirement plan participants who wish to take advantage of the plan's loan provision must agree to the following restrictions on the amount of the loan and how it is repaid: Generally, a participant may borrow no more than $50,000 or one-half of the vested account balance, whichever is less. A participant's loan must be repayable by its terms within 5 years, except if the loan is used to acquire a participant's principal residence. A participant is allowed to repay a loan on the last possible date and take out the maximum loan amount again immediately after repayment. 2 and 3. 1 and 2. 1 only. 3 only.

B

Shawn, age 32, needs $10,000 for the purchase of a primary residence. She has no other source of funds at her disposal. Her Section 401(k) plan allows participant loans. The current value of Shawn's deferral account is $14,000 of which $9,500 is her aggregate vested balance. What is the maximum loan Shawn can take from the Section 401(k) plan? Question 5 options: $10,000 $9,500 $7,000 $14,000

B

Which of the following statements regarding Marian is CORRECT? A. If she continues to work for ABC Company, she is permitted to defer her RMD until after she retires. B. She can roll her account balance over into a rollover IRA when she terminates employment. C. If she rolls her account balance into a rollover IRA and she does not commingle the funds with other IRA funds, subsequent distributions from the IRA will be taxed as long-term capital gain. D. If she takes her RMD by April 1 of next year, she will not be required to take any other distri-butions next year.

B

Which of the following statements regarding the Section 72(t) early distribution penalty is NOT correct? The 10% penalty applies to distributions that are made from a qualified plan, a Section 403(b) plan, a traditional IRA, or a SEP plan. The tax does not apply to any distribution from a Roth IRA. A 10% penalty is imposed on the taxable amount of a distribution made to a participant that has not yet attained age 59½, unless a specific exception applies. The 10% tax applies only to the taxable portion of the distribution.

B

Which of the following statements regarding the net unrealized appreciation (NUA) portion of employer stock received in a lump sum distribution is CORRECT? The NUA portion is: Question 9 options: taxed as ordinary income in the year of the distribution. taxed at the capital gains rate when the stock is sold. taxed as ordinary income when the stock is sold. received tax free.

B

Derek owns a Roth IRA with a current value of $200,000. He turns 70½ years old on August 23, 2018. Which of the following statements is CORRECT? Question 3 options: A. Derek must begin taking required minimum distributions by April 1, 2018. B. Derek must begin taking required minimum distributions by April 1, 2019. C. Derek can continue making contributions to his Roth IRA assuming he has qualifying earned income. D. Derek can no longer make contributions to the Roth IRA.

C

Emma is a school librarian and participates in a Section 403(b) plan at work. Four years ago, she borrowed $10,000 from the plan. Eight months ago, she made the final payment of $1,000 to pay off that loan. Her vested account balance is currently $400,000. What is the maximum loan amount Emma can take from the plan this year? Question 16 options: $50,000 $390,000 $49,000 $200,000

C

Gary is 56 years old and has a traditional IRA comprised of deductible contributions. He will withdraw $25,000 from the account to use as a down payment on a second home to be used as a winter retirement home. What are the tax ramifications of this withdrawal? Question 13 options: The withdrawal is taxed as capital gains. The withdrawal is taxed as ordinary income. The withdrawal is subject to ordinary income tax and a 10% early withdrawal penalty tax. The withdrawal is subject to capital gains tax and a 10% early withdrawal penalty tax.

C

Mark and Julie are both age 58 and have come to their financial planner, Jack, a CFP® professional, for advice. Mark has been laid off from his current position. He expects to be recalled to work within 6 months as the layoff is to allow new machinery to be installed, after which time manufac- turing will start again. In the meantime unemployment benefits are not enough to meet their cur- rent financial needs. The couple is afraid of depleting their retirement assets to fill the gap but do not know what else to do. Mark has a SEP plan account at his old employment with a balance of $360,000. Julie has a Section 401(k) at her place of employment with a plan balance of $280,000 and it has loan provisions. They have no mortgage on their home and their savings is currently being depleted by living expenses since Mark ceased working. Which of the following is the best recommendation for Jack to make to the couple? A. Take a distribution from Julie's Section 401(k) plan for 6 months of expenses. B. From Mark's SEP plan, take substantially equal payments until Mark attains age 591⁄2. C. Julie should take a loan from her Section 401(k) plan for the minimum amount needed. D. Mark and Julie should obtain a line of credit using their personal residence as collateral.

C

Thomas received a lump sum distribution of 10,000 shares of stock from his employer's stock bonus plan valued at $1 million when he separated from his employer at age 60. The value of the stock at the time of contribution to the plan was $250,000. What are the tax consequences of this distribution? $750,000 is treated as net unrealized appreciation (NUA). The NUA is not taxed upon distribution. Thomas' adjusted basis in the shares is $250,000. The $250,000 is taxable as ordinary income in the year of the lump sum distribution. 1, 2, 3 and 4. 3 and 4. 1, 2 and 3. 1 and 2.

C

What is the required minimum distribution (RMD), if any, Marian must receive for 2018? A. $0 B. $182,482 C. $188,679 D. $207,547

C

Which of the following distributions from a qualified plan would NOT be subject to the 10% early withdrawal penalty, assuming the participant has not attained age 591⁄2 at the time of the distribu- tion? 1. Distribution for higher education costs for the taxpayer, spouse, child, or grandchild 2. Distribution made to a qualifying family member under a QDRO 3. Distribution made after separation from service from the employer after attainment of age 55 4. Distribution to pay employer-sponsored health insurance premiums on a pretax basis A. 1, 2, and 3 B. 1 and 4 C. 2 and 3 D. 3 and 4

C

Which one of the following retirement plans generally has loan provisions? A. Defined benefit pension plans B. Money purchase pension plans C. Section 401(k) plans D. SEPs

C

The 20% mandatory withholding requirement applies to distributions from all of the following EXCEPT: Section 403(b) plans. qualified plans. Section 457 plans. IRAs.

D

Historically, employees receiving lump-sum distributions from qualified plans were allowed to elect from one of several options available under special tax rules; however, many of these tax advantages have been eliminated and distributions are treated as ordinary income when calculating income tax for the year. T/F

T

If an individual take's advantage of the plan's loan provision, a participant's loan must be repayable by its terms within 5 years, except if the loan is used to acquire a participant's principal residence. T/F

T

If the distribution is not rolled over within the required time frame, the distribution becomes taxable. T/F

T

Regarding rollovers, if the distribution is not rolled over within the required time frame, the distribution becomes taxable. T/F

T