IRA Certified IRA Services Professional 4 — Questions and Answers
Question 1: A non-spouse beneficiary who inherited an IRA from someone who died in 2020 is generally subject to which distribution rule under the SECURE Act?
- Life expectancy (stretch) distributions
- 5-year rule
- 10-year rule (Correct answer)
- Lump-sum distribution only
Correct answer: 10-year rule
The SECURE Act replaced the stretch IRA with the 10-year rule for most non-spouse beneficiaries of decedents dying after December 31, 2019.
Question 2: Which category of beneficiary is still permitted to use the life expectancy (stretch) method for inherited IRA distributions?
- Adult children
- Siblings
- Eligible designated beneficiaries (e.g., surviving spouse, minor child, disabled individual) (Correct answer)
- Trusts
Correct answer: Eligible designated beneficiaries (e.g., surviving spouse, minor child, disabled individual)
Eligible designated beneficiaries (EDBs), including surviving spouses, minor children of the deceased, chronically ill individuals, and those not more than 10 years younger, may still use the stretch method.
Question 3: What is the annual IRA contribution limit for an individual age 55 in 2024?
- $7,000
- $8,000 (Correct answer)
- $6,500
- $10,000
Correct answer: $8,000
In 2024, individuals age 50 or older may contribute up to $8,000 to an IRA ($7,000 base + $1,000 catch-up).
Question 4: An individual has both deductible and nondeductible Traditional IRA funds. When they take a distribution, how is the taxable amount calculated?
- LIFO — last-in, first-out basis
- Pro-rata rule based on total IRA balances (Correct answer)
- FIFO — first-in, first-out basis
- The oldest contributions are distributed first
Correct answer: Pro-rata rule based on total IRA balances
The pro-rata rule requires that each distribution be treated as coming proportionally from pre-tax and after-tax (basis) amounts across all Traditional IRAs.
Question 5: Which transaction allows an IRA owner to move funds directly from a Traditional IRA to a Roth IRA without the funds passing through the owner's hands?
- 60-day rollover
- Qualified charitable distribution
- Direct conversion (trustee-to-trustee transfer) (Correct answer)
- Recharacterization
Correct answer: Direct conversion (trustee-to-trustee transfer)
A direct (trustee-to-trustee) conversion moves funds directly between the custodians, avoiding the 60-day rule and withholding complications.
Question 6: A qualified charitable distribution (QCD) from an IRA must be made directly to a qualifying charity and is excluded from gross income up to what annual limit?
- $50,000
- $100,000 (Correct answer)
- $150,000
- $200,000
Correct answer: $100,000
IRA owners age 70½ or older may exclude up to $100,000 per year in QCDs from gross income (indexed for inflation starting 2024).
Question 7: Which of the following investments is explicitly prohibited inside an IRA under IRC Section 408?
- Exchange-traded funds (ETFs)
- Real estate investment trusts (REITs)
- Collectibles such as artwork and antiques (Correct answer)
- Treasury bonds
Correct answer: Collectibles such as artwork and antiques
IRC Section 408(m) prohibits IRAs from investing in collectibles, including artwork, rugs, antiques, metals (with exceptions for certain coins/bullion), gems, stamps, and alcoholic beverages.
IRA Certified IRA Services Professional 4
A non-spouse beneficiary who inherited an IRA from someone who died in 2020 is generally subject to which distribution rule under the SECURE Act?