1-

Earnings on nondeductible IRA contributions are allowed to accumulate tax-free until they are withdrawn.

True

False

2-

Steven is 27 years old and has a total AGI of $110,000 in 2016. He contracts pneumonia in 2016 and incurs a medical bill that totals $7,500. He withdraws $7,500 from his traditional IRA to pay the bill. Which of the following is true?

a.He is not subject to penalties on the IRA withdrawal because it was for medical expenses.

b.He is subject to penalties on the IRA withdrawal because a person may not take a withdrawal from a traditional IRA until they are 59 years old no matter what.

c.He is subject to penalties on the IRA withdrawal because the withdrawal did not cover a portion of medical bills that exceeded 10 percent of his AGI.

d.He is not subject to penalties on the IRA withdrawal because he was disabled by pneumonia for 2 weeks.

e.None of these choices are correct.

3-

Polly, age 45, participates in her employer's Section 401(k) plan which allows employees to contribute up to 15 percent of their salary. Her annual salary is $100,000 in 2016. What is the maximum she can contribute to this plan on a tax-deferred basis under a salary reduction agreement?

a.$19,000

b.$25,000

c.$15,000

d.$20,500

e.None of these choices are correct.