Retirement Income Taxation Flashcards
7 cards from real CRPC practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Retirement Income Taxation flashcards as text
A client aged 58 takes a distribution from her 401(k) after separating from service. She is subject to which early distribution rules?
Answer: No penalty because of the age-55 separation-from-service exception
The age-55 rule allows penalty-free distributions from a qualified plan if separation from service occurs in or after the year the participant turns 55.
Which of the following best describes 'basis' in a traditional IRA?
Answer: After-tax (nondeductible) contributions that have already been taxed
Basis in a traditional IRA consists of nondeductible contributions that were made with after-tax dollars and tracked on Form 8606.
A retiree in the 22% federal bracket receives $15,000 in qualified dividends from a taxable brokerage account. What federal rate applies to these dividends?
Answer: 15% qualified dividend rate
Taxpayers in the 22% bracket fall in the 15% qualified dividend tax bracket for the 2024 tax year.
A Qualified Longevity Annuity Contract (QLAC) purchased inside a traditional IRA has which of the following tax advantages?
Answer: The premium used to purchase a QLAC is excluded from the RMD calculation until payouts begin
The QLAC premium (up to IRS limits) is excluded from the IRA balance used to compute RMDs, deferring income until the annuity start date (no later than age 85).
Under the Net Investment Income Tax (NIIT), which retirees are subject to the additional 3.8% tax on investment income?
Answer: Single filers with MAGI exceeding $200,000 and MFJ filers exceeding $250,000
The 3.8% NIIT applies to net investment income for single filers with MAGI over $200,000 and married filing jointly over $250,000.
A client rolled over a 401(k) lump-sum distribution and the plan withheld 20% for federal taxes. What must the client do to avoid taxes and penalties on the withheld amount?
Answer: Deposit the full original distribution amount from personal funds within 60 days, then recover the withholding via tax refund
To complete a tax-free 60-day rollover, the client must deposit the entire pre-withholding amount using personal funds; the withheld 20% is recovered as a tax refund.
Which of the following statements about state income taxation of retirement income is MOST accurate?
Answer: State tax treatment of retirement income varies widely; some states exempt pension or Social Security income while others fully tax it
State taxation of retirement income varies significantly—some states fully exempt Social Security, pensions, or both, while others tax all retirement income as ordinary income.