Series 65 – Uniform Investment Adviser Law Exam Retirement Plans and Taxation 3

Question 1

What is the tax treatment of dividends received from a mutual fund held in a taxable account when reinvested automatically?

Accepted Answer

They are taxable in the year received, even if reinvested

Answer

They are not taxable until the fund shares are eventually sold

Answer

They are exempt from federal income tax if reinvested within 30 days

Answer

They are taxable only if the total exceeds $1,500 per year

Question 2

A client in the 37% marginal tax bracket holds stock for 13 months before selling at a gain. What tax rate applies to the long-term capital gain?

Accepted Answer

20%

Answer

37%

Answer

15%

Answer

0%

Question 3

What is the primary purpose of a qualified domestic relations order (QDRO) in retirement planning?

Accepted Answer

To split a retirement plan between spouses as part of a divorce settlement

Answer

To allow penalty-free IRA withdrawals for medical expenses

Answer

To transfer plan assets to a charity without triggering taxes

Answer

To defer RMDs beyond age 73 in certain circumstances

Question 4

Under ERISA, which of the following best describes a plan fiduciary's duty of loyalty?

Accepted Answer

Acting solely in the interest of plan participants and beneficiaries

Answer

Maximizing short-term investment returns for the plan

Answer

Following the employer's instructions regarding plan investments

Answer

Minimizing plan administrative costs regardless of investment quality

Question 5

Which of the following describes the 'net unrealized appreciation' (NUA) strategy in retirement planning?

Accepted Answer

Taking a lump-sum distribution of employer stock and paying ordinary tax only on the cost basis

Answer

Rolling employer stock from a 401(k) to an IRA to defer all taxes

Answer

Converting a Traditional IRA to a Roth IRA to avoid RMDs

Answer

Using after-tax 401(k) contributions to fund a Roth IRA via mega backdoor Roth

Question 6

An investor contributes $5,000 to a Traditional IRA but later determines they were ineligible to deduct the contribution. What should they file to avoid future double taxation on withdrawal?

Accepted Answer

Form 8606

Answer

Form 1099-R

Answer

Schedule D

Answer

Form 5500

Question 7

Which of the following best describes the 'backdoor Roth IRA' strategy?

Accepted Answer

Making a non-deductible Traditional IRA contribution then converting it to a Roth IRA

Answer

Contributing directly to a Roth IRA regardless of income limits by using a foreign account

Answer

Rolling a 401(k) directly into a Roth IRA without paying income taxes

Answer

Contributing to a Roth 401(k) and then transferring funds to a Roth IRA at retirement