tax 12

Alice and Mike file a joint return for 2022 on April 18, 2023. Alice, who is a nonworking spouse, is 49. Both Alice and Mike contributed $2,000 each to a traditional IRA, although they qualified to contribute the maximum amount. They filed their return timely. On June 1, 2023, Mike's mother gave each of them $1,000. What additional amount of the gift may Alice and Mike contribute to each of their IRAs for the year 2022?

$0

Bill correctly filed as single for 2022. The only income he earned was $78,500 as a construction engineer, and he was covered by a retirement plan at work. What is Bill's maximum IRA deduction for 2022?

$0

Gina, who is single, received taxable compensation of $1,700 in 2021 and $2,500 in 2022. She did not actively participate in a pension plan. She contributed $2,000 in 2021 and $2,000 in 2022 to her IRA. On March 18, 2022, she withdrew $300 of her 2021 contribution plus the interest accumulated on it from her IRA and did not deduct that amount on her 2021 tax return. Based on this information, what is the amount of her excess contributions subject to the 6% tax?

$0

If neither you nor your spouse is covered by an employer retirement plan for any part of the year, the maximum allowable deduction for contributions to a Roth IRA is

$0

Mark established a Roth IRA at age 40 and contributed $3,000 per year to the account for 20 years. He met the income limits for contributing to the account and was therefore eligible to hold a Roth IRA. Mark now wishes to withdraw the $100,000 of accumulated funds from his Roth IRA. What is the amount of the distribution that is included in Mark's gross income?

$0

On April 8, 2022, Alan received a lump-sum distribution of $30,000 cash and stock worth $20,000 from his employer's retirement plan. The stock was not stock of his employer. Alan sold the stock for $30,000, and on June 3, 2022, he rolled over $60,000 in cash to an individual retirement account ($30,000 from the original distribution and $30,000 from the sale of the stock). What is the amount of gain to be included in Alan's gross income for 2022?

$0

Ricky, age 35, and Lacy, age 51, are married and file a joint return. Ricky is covered by an employer plan. In 2022, Ricky had compensation of $50,000 and Lacy had compensation of $2,000. Their modified AGI was $245,000. What is the amount of the deductible contribution that can be made for Lacy to her traditional IRA for 2022?

$0

Thad Manning is a single taxpayer under age 50. For the year, Thad earned a salary of $180,000 from his job at Rocky Top Corporation. This was his only source of income for the year. What is the maximum contribution Thad can make to a Roth IRA for the year?

$0

In 2022, Ivan was over age 72. The balance at the beginning of 2022 of his traditional IRA was $41,000. All of his IRA contributions had been tax deductible. The required minimum distribution for 2022 was $3,000. If Ivan only took a distribution of $1,000, what is the amount of excise tax that Ivan would have to pay on the excess accumulation?

$1,000

Celeste, who is single, worked recently for a telephone company in France and earned $1,500 for which she claimed the foreign-earned income exclusion. In addition to that, she earned $1,200 as an employee of an answering service while she was in the U.S. She also received taxable alimony of $400 for the year (divorce executed before 2019). What is her maximum amount of allowable contribution to a traditional IRA for the year 2022?

$1,600

P was eligible for, and set up as his only retirement plan, an individual retirement account (IRA) for Year 1 on January 27, Year 2. On February 15, Year 2, P contributed $1,700 to his account. Mr. P's income for Year 1 consisted of the following: Wages $9,000 Interest income 3,000 Dividend income 2,100 What is P's deduction for Year 1?

$1,700

Minnie's tax return for 2022 shows the following income: $800 wages $6,490 unemployment compensation $1,000 alimony (2018 divorce) $8,000 rental income from apartment buildings she owns What is Minnie's earned income for the purpose of determining how much she can contribute to an IRA?

$1,800

Which of the following is a true statement regarding Sec. 529 plans?

$10,000 may be distributed to pay for qualified student loans.

Tony and Janet are married filing a joint return. In 2022, Tony's taxable compensation is only $1,500, and Janet's compensation is $58,500. Tony contributed all $1,500 of his earnings to a Roth IRA. Neither Tony nor Janet is covered by a retirement plan. What is the maximum amount the couple may deduct for traditional IRA contributions for the two of them if they are both under age 50?

$10,500

In 2022, Ruth and Lester were both under age 50. Ruth worked full-time as a county magistrate and was covered by a retirement plan at work. Lester owns some rental property for which he does minor repairs but provides no extraordinary services. Lester had to serve on a jury during 2022. Ruth and Lester's income for 2022 was composed of the following: Ruth's salary $53,000 Lester's net rental income 8,000 Lester's jury duty pay 58 Joint taxable investment income 6,000 Ruth and Lester will file a joint return and timely contribute to their respective IRAs the maximum amount for which they can claim a deduction. What is the amount of Ruth and Lester's largest allowable IRA deduction for 2022?

$12,000

Joe and Denise are married and both under age 50. They each have an IRA. During the current year, Joe earned $2,500 and Denise earned $40,000. Neither is covered by an employer retirement plan. What is the maximum amount they can contribute to the two IRAs for the year?

$12,000

Paul, a full-time graduate student at a state university, incurred the following expenses related to his attendance in the current year:Off-campus housing$7,800Utilities$3,200Books, fees, and supplies2,500Computer entertainment software 700Internet access 350Paul's tuition was paid through scholarships. Annual housing allowance for the university is $10,000. How much of Paul's expenses may be paid with Sec. 529 funds?

$12,850

Gary and Mabel have been married for many years and file jointly. Gary was born February 21, 1947. Mabel was born April 10, 1951. They each received Social Security benefit payments throughout 2022. Gary earned $15,000 as a part-time security guard in 2022; he was not covered by any type of retirement plan. Mabel has been retired for many years. Gary and Mabel expect their 2022 adjusted gross income not to exceed $109,000. What is the amount of Gary and Mabel's largest allowable IRA deduction for 2022 (assume the proper amount claimed as a deduction was paid timely)?

$14,000

Ms. Seburn had the following during the current year:Taxable alimony received$ 4,000 Wages12,000 Net loss from self-employment(10,000)Interest income3,000 For the purpose of an IRA, Ms. Seburn had compensation for the current year of

$16,000

Betty, who is single, had income in 2022 totaling $2,500. She is 35 years of age, and the income she received consisted of $2,000 earned from clerical work and $500 from interest income. What was the maximum amount of money that she could have contributed during the year to a traditional IRA?

$2,000

Gerald, age 50, withdrew $10,000 from his IRA to pay for the graduate school expenses of his son. His son's educational expenses were $10,000, and he received a $2,000 scholarship from the university to help reduce these expenses. What amount of the withdrawal from the IRA is subject to the 10% early withdrawal tax?

$2,000

Peter and Jill are married and file a joint return. In 2022, Jill was a media relations manager for a large firm and earned $204,500; Peter owns a graphic design business that showed a net profit of $500 for 2022. In 2022, Jill was covered by an employer's plan and Peter was not. Their adjusted gross income was $209,000. What is the maximum deductible amount that Peter can contribute to a traditional IRA?

$3,000

Elvin is single, age 35, and has total wages of $72,000. His adjusted gross income is also $72,000 before any IRA contribution. Elvin works for the Murphy Corporation, which sponsors a retirement plan that Elvin participates in. In addition, Elvin contributes $6,000 to his IRA account. What amount can Elvin deduct on his 2022 income tax return?

$3,600

Vernon, age 73, had compensation of $2,500 in 2022. He made a $3,000 contribution to his traditional IRA during 2022. The balance of the IRA account at the end of 2022 was $10,000. Vernon did not withdraw any amount of the contribution by the due date of the 2022 return. What would be the tax as a result of an excess contribution for 2022?

$30

Joe has a traditional IRA with a basis of $8,800. In 2022, this was his only IRA. On December 31, 2022, he converted $44,000 of the $88,000 total value of the IRA to a Roth IRA. He files as head of household and his AGI, without the conversion, is $62,000. What amount of income will be included on Joe's 2022 return as the result of this conversion?

$39,600

Larry and Marge Strong are married and living together. They have decided to file joint federal income tax returns for 2022. Larry is an active participant in his employer's pension plan. Marge is not an active participant in any plan. Each contributed $6,000 to an individual retirement account (IRA) on February 1, 2023. Larry and Marge each have adjusted gross income of $103,000. The deductible portion of Marge's compensation to her IRA is

$4,800

What is the maximum amount that Darlene, who is single, may contribute to a Roth IRA in 2022? She has modified AGI of $132,000 and is under 50 years of age.

$4,800

Frank wants to borrow from his qualified plan for some improvements to his principal residence. Frank's present value of his vested accrued benefit is $80,000. How much can Frank borrow from his plan without receiving treatment as a distribution?

$40,000

George, a single taxpayer under age 50, has W-2 income of $31,000. During the 2022 tax year, he contributed $6,500 to his traditional IRA. What is the amount of George's excess contributions?

$500

For the year, Charles and Mary, both under age 50, filed a joint income tax return. Charles earned $35,000 and Mary earned $250 for that year. Mary contributed $6,000 to a spousal IRA. What is the maximum amount Charles can contribute to his own IRA?

$6,000

Jamal and Ronee Smith are married and filed a joint return for 2022. Jamal is 45 years old, and Ronee is 46 years old. Jamal earned a salary of $60,000 in 2022 from his job at Sunshine Corporation. Ronee earned $6,000 from her part-time job at Rain Corporation. On May 1, 2022, Jamal contributed $6,000 to a Roth IRA for himself. What is the maximum contribution Ronee may make in 2022 to her Roth IRA?

$6,000

Margaret will receive Social Security benefits at retirement but has no other retirement plan coverage. Her present and past employers have not had retirement plans available. In 2022, she files as single, and her earnings are $71,000. Also in 2022, she contributes $6,000 to a traditional IRA. How much of the $6,000 contribution may she deduct?

$6,000

In 2022, MaryAnn, a nonworking spouse, files a joint return with Jack, who is not covered by a pension plan at work. Their AGI is $50,000, and Jack plans to contribute $5,500 to a traditional IRA. MaryAnn, who is 51, wishes to contribute to an IRA. What is the maximum amount she can contribute?

$7,000

If distributions from your traditional IRA are less than the minimum required distribution for the year, you may have to pay an excise tax for that year on the amount not distributed as required. The excise tax is how much?

50%

John failed to take required minimum distributions from his traditional IRA. The excess accumulation is subject to a penalty of

50%

Which of the following is a true statement regarding a rollover distribution from a qualified plan to a traditional IRA?

A hardship distribution from a qualified plan is not an eligible rollover distribution.

Taxable compensation for IRA purposes excludes all of the following EXCEPT

Alimony and separate maintenance payments.

Which of the following are examples of prohibited transactions with a traditional IRA?

All of the answers are correct.

Which of the following is an eligible educational institution for the Sec. 529 Qualified Tuition Program?

All of the answers are correct.

Which of the following amounts may be converted directly to a Roth IRA, provided all requirements are met?

Amounts in a SIMPLE IRA, and the 2-year participation period has been met.

Which of the following statements regarding Roth IRAs is false?

An individual may place $6,000 into a Roth IRA in addition to other IRA contributions.

Which one of the following types of individual retirement accounts (IRAs) cannot be established?

An individual retirement account with a trustee who invests one's money in life insurance contracts.

Which of the following statements is false with respect to setting up a traditional individual retirement account (IRA)?

An individual who files a joint return and is not covered by an employer retirement plan can deduct the entire contribution to an IRA, regardless of the amount of his or her adjusted gross income, even if the spouse is covered by an employer's plan.

Generally, an employee must begin receiving distributions from his or her traditional IRA no later than which of the following dates?

April 1 of the year following the year in which the employee reaches age 72.

On April 18, 2023, Mr. Thomas filed Form 4868, Application for Automatic Extension of Time to File, extending the due date for filing his 2022 income tax return to October 17, 2023. By what date must he make his IRA contribution to qualify for an IRA deduction on his 2022 return?

April 18, 2023.

Morris, a single taxpayer, is not covered by a qualified plan at his place of employment. He wishes to establish an IRA and contribute $6,000 for 2022. An IRA may be invested in all of the following accounts EXCEPT

Artwork.

Owners of traditional individual retirement accounts (IRAs) are required to begin receiving distributions no later than which of the following?

By April 1 of the year following the year in which the owner reaches age 72.

In December 2019, Gail worked for ABC Co. and participated in its retirement plan. On February 1, 2022, Gail was employed by XYZ Corp., which has a qualified retirement plan. On March 1, 2022, the ABC Co. plan administrator distributed to Gail her vested share of the plan. Gail was 42 years old at the time of distribution. Which of the following will allow Gail to avoid paying taxes and penalties on her withdrawal?

Contribute the distribution to the XYZ Corp. plan within 60 days.

Which of the following is true regarding contributions to a Roth IRA?

Contributions may be made regardless of age, provided other requirements are met.

Dave, age 40, had a traditional IRA with a $40,000 balance at the beginning of 2022. All of Dave's contributions have been tax deductible. On July 1, 2022, Dave borrowed $20,000 from the IRA account. Which of the following would be a correct statement regarding the tax consequences of this transaction?

Dave would be required to include $40,000 in income as a distribution in 2022.

For a Roth IRA to have a qualified distribution, the distribution must satisfy a 5-year holding period and must be made on or after the date the individual attains age 59 1/2. Which of the following is NOT an exception to the attaining age 59 1/2 requirement?

Distribution used to pay for qualified education expenses.

When figuring compensation for purposes of determining the amount of an allowable contribution to a traditional IRA, which of the following is an incorrect statement?

Earnings and profits from property, such as rental income, are considered compensation.

Edwin and Donna were married. Edwin had established a traditional IRA to which he made contributions and had taken no distributions. The total value of the IRA was $50,000, of which $20,000 was nondeductible contributions. As the spousal beneficiary, which of the following applies to Donna?

Edwin's $20,000 basis in the IRA may be treated as basis to Donna.

All of the following are true statements regarding Sec. 529 plans EXCEPT

Eligible education costs are determined without regard to scholarships, grants, and other financial aid received by the beneficiary.

Qualified higher education expenses under a Sec. 529 plan include all of the following EXCEPT

Foreign student exchange programs.

An investment by an IRA in which of the following assets will NOT be treated as a distribution?

Gold bullion exceeding the minimum fineness required to satisfy a regulated futures contract.

George, single and age 40, is covered by a pension plan at work. For 2021, George could have contributed and deducted $6,000 to his individual retirement account but could only afford to contribute $2,000, which he did on April 14, 2022. After April 15, 2022, George contributed $6,000. Since his modified AGI for 2022 was over $68,000, George computed that his reduced IRA deduction for 2022 was $600. Which of the following is NOT an option available for George?

He can deduct $4,600 in 2022 since he had a carryover from the immediately preceding tax year.

After many years as a bachelor, Buddy, age 50, married Penny, age 63. Penny's only income was $10,800 of Social Security. They filed a joint return for year 2022 with a modified adjusted gross income of $150,000. Buddy is covered by a retirement plan at work, where he receives compensation of $129,000. He wishes to contribute to an IRA for himself and for Penny. Which of the following will provide them the greatest allowable tax benefit?

He may contribute $7,000 to each IRA but only take a deduction for the $7,000 to Penny's IRA.

Scott McTavish made a rollover contribution from his traditional IRA to a newly created Roth IRA on December 1, 2020. Also, on February 1, 2022, he made another rollover contribution from an employer IRA to the same account. Which of the following is true?

He may not withdraw the funds tax-free earlier than January 1, 2025.

Mr. Knox wants to make contributions to an IRA (spousal IRA) for his wife. For Mr. Knox to be eligible to make such contributions, all of the following requirements must be met EXCEPT

His wife must have no taxable compensation for the tax year.

Martin, age 35, made an excess contribution to his traditional IRA in 2022 of $1,000, which he withdrew by April 17, 2023. Also in 2022, he withdrew the $50 income that was earned on the $1,000. Which of the following statements is true?Martin must include the $50 in his gross income in 2022.Martin would have to pay the 6% excise tax on the $1,050.Martin would have to pay the 10% additional tax on the $50 as an early distribution.Martin would have to pay the 10% additional tax on the $1,000 because he made a withdrawal.

I and III only.

In general, a taxpayer over age 50 may make which of the following in a given tax year?A $7,000 contribution to a Roth IRA.A $7,000 contribution to a traditional IRA.

I or II.

Kimberly, age 30, a full-time student with no taxable compensation, married Michael, age 30, during 2022. For the year, Michael had taxable compensation of $35,000. He plans to contribute and deduct $6,000 to his traditional IRA. If he and Kimberly file a joint return, how much may each deduct in 2022 for contributions to their individual traditional IRAs and what is the compensation Kimberly uses to figure her contribution limit?

IRADeduction $6,000 Compensation forKimberly to FigureIRA Contribution Limit $29,000

With regard to excess contributions to a traditional IRA, which of the following statements is false?

If the excess contribution for a year is not withdrawn by the date a taxpayer's return is due, the taxpayer is subject to an 8% tax.

For traditional individual retirement accounts (IRAs) for tax year 2022, which of the following is true?

If your spouse is covered by a retirement plan and you are not, your traditional IRA deduction is not limited if your modified AGI on a joint return is less than $204,000.

All of the following types of accounts are permitted for individual retirement accounts EXCEPT

Individual savings bonds clearly designated as an IRA.

Which of the following individual retirement accounts does NOT meet Internal Revenue Code requirements?

Individual savings bonds.

The use of IRA funds in prohibited transactions can result in additional taxes and penalties. Which of the following is NOT a prohibited transaction in a traditional IRA?

Inheriting your spouse's IRA.

Joyce was recently divorced. Per a court order, she must transfer her IRA to her former spouse. To avoid paying taxes on the withdrawal, which of the following is the best choice?

Make a direct transfer of the IRA assets.

Maria has a traditional IRA from which she has taken a taxable distribution of $8,000. Under which of the following circumstances will the distribution be subject to the 10% penalty for premature distributions?

Maria is age 57. The distribution is not part of a series of equal periodic payments. She has no qualifying expenses or condition.

An individual retirement account (IRA) is a trust or custodial account created by a written document that must meet all of the following requirements, EXCEPT

Money in your account can be used to buy a life insurance policy.

For 2022, Mr. and Mrs. White filed a joint income tax return. Mr. White's salary was $36,000, Mrs. White's was $20,000, and their modified adjusted gross income was $113,000. Mr. White was covered by his employer's retirement plan. Mrs. White's employer did not have a retirement plan. Mr. White contributed $6,000 to an individual retirement account (IRA), and Mrs. White contributed $1,500 to an IRA. What is the maximum IRA deduction each is entitled to take for 2022?

Mr. White $4,800 Mrs. White $1,500

All of the following types of income would be considered compensation in determining if an individual retirement account could be set up and contributions could be made EXCEPT

Net rental income.

Annual contributions to a Sec. 529 Qualified Tuition account for a designated beneficiary are limited to

No limit.

Generally, which of the following rules apply to both traditional IRAs and Roth IRAs?

Non-rollover contributions are generally limited to $6,000 each year or 100% of compensation, whichever is less.

Joe Smith never married and had no children. When he died, he left all of his assets, including his traditional IRA, to his nephew, David. What is David allowed to do with the inherited IRA?

None of the answers are correct.

Winston turned 72 on June 1, 2022. What date must he receive his minimum distribution by?

None of the answers are correct.

Lenny and Norma file a joint return for tax year 2022. Lenny is covered by a retirement plan but Norma is not. Norma wishes to make a contribution to a traditional IRA, and her earnings alone are $1,500. The combined earnings on the joint return are $204,000 (the same as the AGI). Which of the following is true?

Norma may make a deductible contribution of $6,000.

Which of the following would be an allowable investment for a traditional IRA?

One-ounce silver coins minted by the U.S. Treasury Department.

A taxpayer has an excess accumulation in her IRA for the year. It is due to a reasonable error, and the taxpayer has taken steps to remedy the insufficient distribution. Which of the following statements best describes the course of action this taxpayer should take with regard to the excise tax on an excess accumulation?

Pay the penalty tax that is due with the return, attach a written statement to the return explaining the situation, and wait for the IRS to approve by sending a refund of the penalty tax that was paid.

Generally, which of the following is a prohibited transaction concerning your traditional IRA?

Pledge your IRA account as security for your mortgage.

All of the following types of income are considered earned compensation in determining whether an individual retirement account can be set up and contributions made EXCEPT

Rental income from a property in which the taxpayer has active participation.

Sam received a total distribution of $40,000 from his employer's 401(k) plan consisting of $25,000 in cash and land with a fair market value of $15,000. If Sam decides to keep the land, what is the total amount that he can roll over to his traditional IRA?

Sam can roll over the $25,000 cash received into his IRA.

Generally, an IRA contribution is limited to the lesser of $6,000 in 2022 or the taxpayer's compensation. However, which of the following items is NOT treated as compensation for this limitation?

Self-employment loss.

With regard to a spousal IRA, which of the following statements is false?

Spouses can own an IRA account jointly.

Sunnie is single and does not actively participate in her employer's pension plan. She received taxable compensation of $3,500 in Year 1 and $4,500 in Year 2. Her modified adjusted gross income was $26,000 in both years. For Year 1, she contributed $6,000 to her IRA but deducted only $3,500 on her income tax return. For Year 2, she contributed $2,000 but deducted $4,500 on her income tax return. Based on this information, which of the following statements is true?

Sunnie must pay an excise tax for Year 1 on the $2,500 excess contribution made in Year 1, but since she properly treated the Year 1 excess contribution as part of her Year 2 deduction, she does not owe the excise tax for Year 2.

Each of the following beneficiaries withdrew $7,000 from their Sec. 529 plan to pay for qualified expenses to attend an eligible educational institution. Withdrawals were made during the same calendar year as the expenses were paid. Under which circumstance may taxes and penalties be imposed on the student's withdrawal?

Sybil paid $5,000 for her daughter's enrollment at a qualified private secondary school and used the remaining $2,000 to pay for childcare.

Which of the following is compensation for the purpose of contributions to individual retirement accounts?

Taxable alimony and separate maintenance.

With regard to IRAs, which of the following is considered earned compensation?

Taxable alimony.

In which situation must a taxpayer pay the additional 10% tax on a premature distribution from his or her IRA?

Taxpayer, age 40, used the distribution to pay emergency medical bills for his wife. The medical bills equal 5% of the couple's AGI.

A contribution to a traditional individual retirement plan (IRA) is deductible for tax year 2022 in which of the following situations?

The individual's employer does not have a retirement plan at any time during 2022.

Which of the following is a true statement regarding Sec. 529 plans?

The purpose of the plan is to provide for a beneficiary's qualified higher education expenses.

A Sec. 529 is an account for qualified higher education expenses. What is the primary purpose of a Sec. 529 qualified tuition program?

To provide for a beneficiary's qualified higher education expenses.

Under a Sec. 529 plan, up to $10,000 per year may be used by a designated beneficiary to pay

Tuition at a public, private, or religious elementary or secondary school.

Diane, single and age 49, made a $5,000 contribution to her traditional IRA in 2022. Her compensation for 2022 was $4,000. She filed a Form 4868 for an extension until October 17, 2023, to file her 2022 return. In order to avoid the 6% additional tax on excess contributions, Diane must do which of the following?

Withdraw the $1,000 excess contribution and all interest earned on the $1,000 by October 17, 2023.

Generally, the excess contribution to an IRA is subject to a tax. Which of the following is true?

You will not have to pay the 6% tax if you withdraw the excess contribution and any income earned on the excess contribution before the date your tax return for the year is due, including extensions.