Chapters_15___16_Solutions_to_Assigned_Solutions

Chapters_15___16_Solutions_to_Assigned_Solutions - Chapters...

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Unformatted text preview: Chapters 15 & 16 Assigned Problems Solutions 52. Ferris and Jody are married and file a joint return. During the current year, Ferris had a salary of $40,000. Neither Ferris nor Jody is covered by an employer-sponsored pension plan. Determine the maximum IRA contribution and deduction amounts in each of the following cases: Because neither Ferris nor Jody are covered by a pension plan, any amounts that they are eligible to contribute to an IRA are deductible for adjusted gross income. a. Jody earns $28,000, and their adjusted gross income is $114,000. Both taxpayers have earned income. They are both allowed to contribute and deduct $5,000 of their earned income to their IRA's. Thus, they may contribute and deduct a total of $10,000 for adjusted gross income. b. Jody does not work outside the home and their adjusted gross income is $65,000. A married couple’s total IRA contribution and deduction is based on the couple’s joint earned income. Because their joint earned income is greater than $10,000, Jody is also allowed to contribute and deduct $5,000 even though she has no earned income. Thus, they may contribute and deduct a total of $10,000 for adjusted gross income. c. Assume the same facts as in part a, except that Ferris is covered by an employer-sponsored pension plan. Because only Ferris is covered by an employer sponsored pension plan, the amount that Jody can contribute and deduct is not phased out until their adjusted gross income exceeds $159,000. Therefore, she can contribute and deduct $5,000 to her IRA. However, because Ferris is covered by an employer- sponsored pension plan and their adjusted gross income exceeds $105,000, his contribution is not deductible. They can contribute a total of $10,000 to their IRA’s ($5,000 each), but they can only deduct $5,000 of their contribution. d. Assume the same facts as in part a, except that Ferris and Jody are covered by an employer-sponsored pension plan. Because both spouses are covered by an employer sponsored pension plan, the amount of the IRA deduction is reduced when a married couple's adjusted gross income exceeds $85,000 and is fully phased out when adjusted gross income exceeds $105,000. Because their adjusted gross income is $114,000, they can each contribute $5,000 but cannot take any deduction for their contributions. 63. Juan and Angel, ages 56 and 54, respectively, decide to establish Roth IRAs. Juan and Angel are married, and both are covered by pension plans where they work. Their adjusted gross income is $125,000. They want to make the maximum contribution to the Roth IRAs. a. What is the maximum amount they may contribute to a Roth IRA? Juan and Angel may make a maximum contribution of $10,000 ($5,000 each) to a Roth IRA. The contributions are not deductible and the earnings will accumulate tax-deferred until withdrawn. If they make a qualified distribution from the Roth IRA, the tax-deferred earnings are not subject to tax. A distribution is qualified if at the time of the distribution, the...
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This homework help was uploaded on 02/20/2009 for the course H ADM 422 taught by Professor Lhensley during the Fall '08 term at Cornell University (Engineering School).

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Chapters_15___16_Solutions_to_Assigned_Solutions - Chapters...

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