CRPC Retirement Income Taxation 2

Question 1

A married couple filing jointly has combined income of $44,000, of which $20,000 is Social Security. What percentage of their Social Security benefit is taxable?

Accepted Answer

50%

Answer

With combined income between $32,000 and $44,000 for MFJ, up to 50% of Social Security benefits are includible in taxable income.

Question 2

Which of the following is NOT an exception to the 10% early withdrawal penalty for distributions from a traditional IRA before age 59½?

Accepted Answer

Separation from service at age 55

Answer

The age-55 separation-from-service exception applies to qualified retirement plans (401k), not IRAs.

Question 3

Under the pro-rata rule, a client with a traditional IRA containing $90,000 of pre-tax funds and $10,000 of nondeductible contributions converts $20,000 to a Roth IRA. How much of the conversion is taxable?

Accepted Answer

$18,000

Answer

The taxable portion is 90% (pre-tax ratio) × $20,000 = $18,000, because non-deductible basis is 10% of the total $100,000 balance.

Question 4

A retiree receives a $30,000 pension that is entirely funded by employer contributions. How is this pension income taxed?

Accepted Answer

Entirely taxable as ordinary income

Answer

Pension distributions fully funded by an employer with no after-tax employee contributions are 100% taxable as ordinary income.

Question 5

What is the income threshold above which 85% of Social Security benefits may be included in taxable income for a single filer?

Accepted Answer

$34,000

Answer

For single filers, combined income above $34,000 triggers the 85% inclusion rate for Social Security benefits.

CRPC - Chartered Retirement Planning Counselor Practice Test

CRPC - Chartered Retirement Planning Counselor Practice Test

CRPC Retirement Income Taxation 2