Which of the following is considered an active participant for determining the deductibility of traditional IRA contributions this year?

1. A participant in a defined benefit pension plan who has just satisfied the eligibility requirements and entered the plan in the past six months
2. A participant in a traditional Section 401(k) plan who is currently not making elective deferrals but has $100 of forfeitures reallocated to her account this year
3. A highly compensated employee with a $500,000 account balance in a profit-sharing plan for which the plan earnings this year are $35,000 but no employer contributions, employee contributions, or reallocated forfeitures were added this year
4. A self-employed professional with no employees maintaining a simplified employee pension (SEP) with a $10,000 account balance funded by a 20% contribution two years ago plus earnings

Which of the following statements regarding prohibited transactions by a fiduciary or an individual associated with traditional IRA accounts is CORRECT?

1. Generally, if an individual or the individual's beneficiary engages in a prohibited transaction with the individual's IRA account at any time during the year, it will not be treated as an IRA as of the first day of the year.
2. If an individual borrows money against an IRA annuity contract, the individual must include in gross income the fair market value of the annuity contract as of the first day of the tax year.
3. Selling property to an IRA by a fiduciary or an individual owner of the IRA is not prohibited.
4. A 50% penalty will be assessed against an IRA owner who borrows money against her IRA.

	I and II
	II and III
	I, II, and III
	I, III, and IV