Chapter 6 Explantion - 1 Explanation If someone other than the owner or beneficiary of the plan engages in a prohibited transaction that person may be

Chapter 6 Explantion - 1 Explanation If someone other than...

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FFA EA Book Reference: CH 6 Adjustments to Gross Income Subsection: Retirement Income Subject: Prohibited transactions and tax effects relating to IRAs 2. Explanation: For 2011, the amount of the student loan interest deduction is the smaller of $2,500 or the amount of interest actually paid in 2011. Correct Answer: C FFA EA Book Reference: CH 6 Adjustments to Gross Income Subsection: Adjustments to income Subject: Adjustments to income (e.g., retirement contributions, student loan interest, alimony) 3. Explanation: For 2011, the most that can be contributed to a traditional IRA generally is $5,000 ($6,000 if you are age 50 or older), or taxable compensation for the year, whichever is smaller. Her taxable compensation is $1,500, so that is also her maximum allowable contribution to a traditional Individual Retirement Account. Correct Answer: B FFA EA Book Reference: CH 6 Adjustments to Gross Income Subsection: Retirement deductions IRAs Subject: Contribution limits and deductibility of contributions 4. Explanation: If distributions are less than the RMD for the year, taxpayers may have to pay a 50% excise tax on the amount not distributed as required. The penalty is calculated on Form 5329, but waivers and exceptions from actual payment of the penalty are possible if certain conditions are met. Correct Answer: C FFA EA Book Reference: CH 6 Adjustments to Gross Income
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Subsection: Retirement Income Subject: Excess accumulations and required minimum distributions 5. Explanation: If an IRA owner dies before he reaches age 701/2 or dies after reaching age 701/2, but before April 1 of the next year, no minimum distribution is required because death occurred before the required beginning date. For a beneficiary of a decedent's traditional IRA, the requirements for distributions from that IRA generally depend on whether the IRA owner died before or after the required beginning date for distributions. Correct Answer: A FFA EA Book Reference: CH 6 Adjustments to Gross Income Subsection: Retirement Income Subject: Excess accumulations and required minimum distributions 6. Explanation: Modified AGI limits did change for 2011. Roth IRA contributions are NEVER deductible. The extension date does NOT apply to traditional IRA contributions. The phase-out range for MFJ with the other spouse covered by a retirement is $169,000 -$179,000. Contributions are allowed when MAGI is not more than lower limit. Correct Answer: D FFA EA Book Reference: CH 6 Adjustments to Gross Income Subsection: Retirement deductions IRAs Subject: Modified adjusted gross income 7. Explanation: Deductible contributions can only be made up to the due date of the return (extensions do not apply), and deductible IRA contributions cannot exceed taxable compensation. If the taxpayer's
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