AFTR Retirement Accounts and Tax Treatment 2

Question 1

A taxpayer converts a traditional IRA to a Roth IRA. How is the converted amount treated for federal income tax purposes?

Accepted Answer

It is taxable as ordinary income in the year of conversion

Answer

It is tax-free

Answer

It is taxable as capital gains

Answer

It is deferred until withdrawals begin

Question 2

Which of the following is NOT a qualifying exception to the 10% early distribution penalty from an IRA?

Accepted Answer

Purchase of a vacation home

Answer

Total and permanent disability

Answer

First-time home purchase (up to $10,000)

Answer

Higher education expenses

Question 3

What is the maximum annual employer contribution to a SEP-IRA for an employee in 2024, expressed as a percentage of compensation?

Accepted Answer

25%

Answer

15%

Answer

20%

Answer

30%

Question 4

Under the pro-rata rule, how are distributions from a traditional IRA that contains both deductible and nondeductible contributions taxed?

Accepted Answer

A proportional part of each distribution is taxable based on the ratio of pre-tax to total IRA funds

Answer

Only deductible amounts are taxed

Answer

Only nondeductible amounts are taxed

Answer

Distributions are always 50% taxable

Question 5

A 73-year-old taxpayer fails to take their required minimum distribution. What excise tax applies to the shortfall under the SECURE 2.0 Act?

Accepted Answer

25%

Answer

10%

Answer

50%

Answer

75%

Question 6

Which of the following retirement plans allows both employee and employer contributions and is typically offered by small businesses with 100 or fewer employees?

Accepted Answer

SIMPLE IRA

Answer

SEP-IRA

Answer

Solo 401(k)

Answer

Defined benefit plan

Question 7

Qualified distributions from a Roth IRA require the account to have been open for at least how many years?

Accepted Answer

5 years

Answer

2 years

Answer

3 years

Answer

10 years