Multiple Choice

1. If a qualified pension plan is being distributed using joint life expectancy: 

a. The taxpayers cannot choose to refigure their life expectancy.

b. If the beneficiary dies, no adjustment of the denominator used to calculate minimum distributions is required.

c. If the beneficiary dies, the life expectancy of a different beneficiary is substituted for the original beneficiary.

d. None of the above.

2. Mark, who is single, must start making distributions from his pension plan beginning April 1, 2014. At the end of 2013 when Mark was 71 years old, the plan had a balance of $220,000. He will use a single life expectancy. What amount must Mark take as a distribution from the pension plan no later than April 1, 2014?

a. $8,302.

b. $12,941.

c. $13,497.

d. $14,193.

3. Matt, age 62, retired in 2014. During the year, he received distributions of $9,000 from his IRA. He made nondeductible contributions of $20,000 to the IRA in prior years and has never received a nontaxable distribution. As of December 31, 2014, the value of his IRA was $150,000. Calculate the taxable portion of Matt’s distribution.
a. $1,132

b. $7,800.

c. $7,868.

d. $9,000.

4. Withdrawals from a Roth IRA are:

a. Subject to the required minimum distribution rules.

b. Taxable if made after the five-tax-year period beginning with the first tax year in which a Roth contribution was made.

c. Deemed to come first from contributions and then from earnings.

d. Not taxable to the extent they exceed contributions, if the five-year holding period requirement is not met.

5. Regarding a Coverdell Education Savings Account: 

a. Distributions are tax-free to the beneficiary if they are used for his or her qualified education expenses.

b. Qualified education expenses include required tuition, fees, books, supplies, and equipment at an eligible education institution.

c. Qualified expenses must be reduced by scholarships or other tax-free income.

d. All of the above apply.

6. Julio is 62 and single. He purchased a single life annuity contract that will pay him $1,000 a month for life with a minimum payout of 10 years. His expected return on the contract:

a. Is $120,000.

b. Is $270,000.

c. Is $282,000.

d. Cannot be determined with the information given.

7. June, age 76, and Augustus, age 78, are married. They purchased a single life annuity contract that will pay $1,500 per month for the life of June. The expected return on the contract:

a. Is $190,800.

b. Is $214,200.

c. Is $405,000.

d. Cannot be determined with the information given.

8. Sanjay purchased a single life annuity contract for $200,000. The contract will pay $15,000 per year beginning in 2014 for the remainder of his life and has an expected return of $330,000. What amount of taxable income must Sanjay report in 2014?

a. $5,909.

b. $9,091.

c. $15,000.

d. $130,000.