Income Tax Fundamentals 2020
38th Edition
ISBN: 9780357391129
Author: WHITTENBURG
Publisher: Cengage
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Chapter 9, Problem 19MCQ
To determine
Introduction: Transfer of assets from one retirement plan to another retirement plan by taxpayer is known as rollovers, these transfers can be accomplished in two ways, rollover of the distribution, in whole or in part to an IRA or any other qualified plan, and direct transfer, also known as a trustee-to-trustee transfer.
To choose: The correct time allowed to roll over the amount received into a new plan to avoid paying taxes on the distribution
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When taxpayer receive distribution from qualified retirement plans, how many time is allowed to roll over the amount received into a new plan to avoid paying taxes on the distribution in the current year, assuming there are no unusual events?
60 days
1 year
180 days
d 90 day
There is no time limit
Self-employed persons can make contributions for their retirement into a special tax-deferred account called a Keogh account. Suppose you are able to contribute $20,000 into this account at the end of each year. How much will you have at the end of 30 years if the account pays 2% annual interest? (Round your answer to the nearest cent.)$
An individual earns an extra $2000 each year and places this money at the end of each year into an Individual Retirement Account (IRA) in which both the original earnings and the interest in the account are not subject to taxation. If the account has an annual interest rate of 11.8% compounded annually, how much is in the account at the end of 45 years? (Round your answer to the nearest cent.)
Chapter 9 Solutions
Income Tax Fundamentals 2020
Ch. 9 - Prob. 1MCQCh. 9 - Abbe, age 56, is married and has two dependent...Ch. 9 - Prob. 3MCQCh. 9 - Prob. 4MCQCh. 9 - Prob. 5MCQCh. 9 - Estimated payments for individual taxpayers are...Ch. 9 - Prob. 7MCQCh. 9 - Prob. 8MCQCh. 9 - Prob. 9MCQCh. 9 - Prob. 10MCQ
Ch. 9 - Ran's wage income is $47,350 in 2019. The combined...Ch. 9 - Prob. 12MCQCh. 9 - Prob. 13MCQCh. 9 - Prob. 14MCQCh. 9 - Prob. 15MCQCh. 9 - Prob. 16MCQCh. 9 - Prob. 17MCQCh. 9 - Prob. 18MCQCh. 9 - Prob. 19MCQCh. 9 - Prob. 20MCQCh. 9 - Prob. 21MCQCh. 9 - Bonnie is getting close to retirement and realizes...Ch. 9 - Prob. 1PCh. 9 - Prob. 2PCh. 9 - Prob. 3PCh. 9 - Prob. 4PCh. 9 - Kana is a single wage earner with no dependents...Ch. 9 - Lamden Company paid its employee, Trudy, wages of...Ch. 9 - Fiduciary Investments paid its employee, Yolanda,...Ch. 9 - Thuy worked as the assistant manager at Burger...Ch. 9 - Prob. 11PCh. 9 - Prob. 13PCh. 9 - Prob. 14PCh. 9 - Allen (age 32) takes a distribution of $20,000...
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- An Individual Retirement Account (IRA) is an account in which the saver does not pay income tax on the amount deposited but is not allowed to withdraw the money until retirement. (The saver pays income tax at that point, but his or her tax bracket is much lower then.)Marlene Silva wishes to have an IRA that will be worth $100,000 when she retires at age 65. (Round your answers to the nearest cent.) (a) How much must she deposit at age 34 at 8 3/8% compounded daily? $ (b) If, at age 65, she arranges for the monthly interest to be sent to her, how much will she receive each thirty-day month?arrow_forwardEarly withdrawals from retirement plans may be subject to an extra tax (10 percent penalty). Which of the following claims about IRA payouts is correct?arrow_forwardJust prior to the payout period the amount of money that is available in the contract as principal paid in over the life of the annuity is determined at $200,000. The total annuity is currently valued at $360,000. The annuity payment is calculated at $24,000 per year. Our client wants to retire at age 65. The IRS Tables multiplier from the IRS Table for Age 65 is 15 (remaining life expectancy). What amount will be tax-excludible to the annuitant? $1,111 until the principal amount has been exhausted $888.89 for the life of the annuitant $1,111 for the life of the annuitant $888.89 until the principal amount has been exhaustedarrow_forward
- A person wants to withdraw $1000 every month, for 21 years, to supplement their pension check when they retire. a. How much money must be in an account that pays 7% interest compounded monthly, in order to meet their needs? b. How much money must be deposited into an account that pays 6.6% interest compounded monthly in order to achieve this amount? The monthly deposits will be made for 45 years C. How much money was actually deposited in to the account? d. How much money will actually be paid out from this account?arrow_forwardA self employed person deposit $1,250 annually in a retirement account that earns 5.5 percent. What will be the account balance at age 62 if the savings program starts when the individual is age 50? How much additional money will be in the account if the saver defers retirement until age 66 and continue the annual contribution until then? How much additional money will be in the account if the saver discontinues the contributions at age 62, but let's it build up until retirement at age 66?arrow_forwardE3-15. A taxpayer is about to receive a $1,000 bonus from her employer. She would like to put this bonus into a retirement account. She has come to you for advice as to whether she should put the $1,000 into a traditional deductible IRA or a Roth IRA. You learn that she faces a current marginal tax rate of 28% and expects to face the same rate in 40 years, when she plans to withdraw the funds at age 70. She expects to earn a pretax rate of return of 10% in either retirement account by investing the funds in corporate bonds. Advise the taxpayer as to what she should do. E3-16. Assume the same facts as presented in E3-15, with the exception that the taxpayer expects her tax rate to be 20% when she retires in 40 years. What should the taxpayer do now?arrow_forward
- The difference between a Roth IRA and a traditional IRA is that in a Roth IRA taxes are paid on the income that is contributed but the withdrawals at retirement are tax-free. In a traditional IRA, however, the contributions reduce your taxable income, but the withdrawals at retirement are taxable. Assume you plan to devote $5,000 to retirement savings in each year. You will retire in 30 years and expect to live for an additional 20 years after retirement.a. Assume the before-tax interest rate is 5%. What will be your after-tax 20-year retirement consumption stream if you choose to save in a traditional IRA? Assume your tax rate is fixed at 30%.b. What will be your 20-year retirement consumption stream if you choose to save in a Roth IRA? c. Which provides better expected results if you expect your tax rate to decrease from 30% today to 25% at retirement?arrow_forwardThe difference between a Roth IRA and a traditional IRA is that in a Roth IRA taxes are paid on the income that is contributed, but the withdrawals at retirement are tax-free. In a traditional IRA, however, the contributions reduce your taxable income, but the withdrawals at retirement are taxable. Assume you plan to devote $5,000 to retirement savings in each year. You will retire in 30 years and expect to live for an additional 20 years after retirement. a. Assume the before-tax interest rate is 5%. What will be your after-tax 20-year retirement consumption stream if you choose to save in a traditional IRA? Assume your tax rate is fixed at 30%. (Round your answers to 2 decimal place.) 20-year consumption stream (assuming monthly payouts) _________________ b. What will be your 20-year retirement consumption stream if you choose to save in a Roth IRA? (Round your answers to 2 decimal place.) 20-year consumption stream (assuming monthly payouts)_________________arrow_forwardThe difference between a Roth IRA and a traditional IRA is that in a Roth IRA taxes are paid on the income that is contributed, but the withdrawals at retirement are tax-free. In a traditional IRA, however, the contributions reduce your taxable income, but the withdrawals at retirement are taxable. Assume you plan to devote $5,000 to retirement savings in each year. You will retire in 30 years and expect to live for an additional 20 years after retirement. a. Assume the before-tax interest rate is 5%. What will be your after-tax 20-year retirement consumption stream if you choose to save in a traditional IRA? Assume your tax rate is fixed at 30%. (Round your answers to 2 decimal place.) b. What will be your 20-year retirement consumption stream if you choose to save in a Roth IRA? (Round your answers to 2 decimal place.)arrow_forward
- With a Roth IRA, when can you withdraw your principal without having to pay taxes on the withdrawal? Group of answer choices After 1 year. Any time. After 10 years. After 5 years.arrow_forwardAssume that you are 22 years old and are started saving for retirement on January 1, 2022. You plan to retire on December 31, 2068, when you are 68 years old. There are 47 years from the time you started investing (saving) until you retire. You have no previous or other retirement savings when you start to save. Assume there are 365 days and 52 weeks in each year from 2022 to 2068. (Ignore leap years). Assume that taxes will not affect any of the amounts or your savings. You invest $50 at the end of each week into a retirement account paying 8.5% compounded weekly for 12 years starting on January 1, 2022. After 12 years, you do not make any more payments or withdrawals and leave the money in the retirement account until retirement. Show all work and answer the following questions: Assuming no withdrawals or additional payments were made, how much money will be in your retirement account after 12 years? After 12 years, how many years are left until you retire? Assuming you made all…arrow_forward.A self-employed person deposits $3,000 annually in a retirement account (called a Keogh or H.R. 10 plan) that earns 8 percent. How much additional money will be in the account if the saver defers retirement until age 70 and continues the contributions?arrow_forward
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