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
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
