QUESTION: 9

Which of the following plans does not have the requirement that its participants must begin withdrawing funds from the plan by April 1st of the year after they turn 70 ½?

I). SIMPLE IRA
II). 401(k)
III). Roth IRA
IV). profit-sharing plan

I and III only
I, III and IV only
III only
All of the above have a mandatory distribution requirement.

Answer(s): C

Explanation:

The Roth IRA does not have the requirement that its participants must begin withdrawing funds from the plan by April 1st of the year after they turn 70 ½. The Roth IRA does, however, have a mandatory distribution requirement that goes into effect if the participant dies.

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QUESTION: 10

Patty Planner has been contributing a sum to a non-qualified variable annuity each month for the last fifteen years in order to reach her ultimate goal of an early retirement. Now that she has turned 60, Patty has decided to retire. Her annuity is now worth $69,000, and her total contributions were $36,000. Patty decides to withdraw $15,000 of her accumulation as a lump sum to fund an extended vacation to Europe that she has always promised herself.
Which of the following statements applies to Patty's situation?

Her $15,000 withdrawal will be taxed as capital gain income, at a preferential rate, but she will also have to pay a 10% penalty for withdrawing the funds prior to turning 62.
Her $15,000 withdrawal will be taxed as ordinary income to her at her marginal tax rate.
Her $15,000 withdrawal is not taxable since it is less than the amount of her total contributions to the plan, but she will be subject to a 10% penalty for early withdrawal.
Her $15,000 withdrawal will be taxable as ordinary income to her at her marginal tax rate, and she will also be subject to a 10% penalty for early withdrawal.

Answer(s): B

Explanation:

If 60-year-old Patty has contributed $36,000 to the annuity that is now worth $69,000 and decides to withdraw $15,000 as a lump sum, the $15,000 will be taxed as ordinary income. She will not be subject to any penalties for early withdrawals since she is over 59 ½ years old, but the IRS uses LIFO-last-in/first-out-accounting in determining whether the income is taxable, so the $15,000 withdrawal will be considered to come from earnings, which have grown tax-free and are, therefore, now taxable.

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QUESTION: 11

Simple Simon owns 1,000 shares in the Pasty Pie Corporation, which has just declared a stock dividend of 5%. Just prior to this announcement, Pasty Pie was selling for $10 a share. This announcement will:

increase Pasty's shares outstanding and reduce Simple's proportionate ownership in the firm.
increase the number of shares that Simple owns to 1,050, which will increase the market value of the shares that he owns from $10,000 to $10,500.
increase the number of shares that Simple owns to 1,050, but this will not affect the
market value of Simple's holdings.
increase Simple's cash by the amount of the dividend paid: 0.05 x $10 = $0.50 x 1,000 shares = $500.

Answer(s): C

Explanation:

If Simple Simon owns 1,000 shares of Pasty Pie Corporation when Pasty declares a 5% stock dividend, the stock dividend will increase his number of shares to 1,050, but it will not affect the market value of Simple's holdings since the market price per share will also decrease proportionately. The aggregate market value of the firm stays the same, but the number of shares outstanding increases, resulting in a lower market value per share. Simple's proportionate ownership remains the same because his shares increased in the same percentage as the shares outstanding of the firm did. A stock dividend does not result in any cash payments to the shareholders.

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QUESTION: 12

Ms. Newbie's client, Mr. Nomad, has decided that he wants to go on an extended backpack trip through the Amazon. Since he'll be out of touch, he has given a friend of his limited power attorney to act on his behalf. Based on this, Mr. Nomad's friend can:

I). present Ms. Newbie with an order to purchase securities on Mr. Nomad's behalf.
II). present Ms. Newbie with an order to sell securities on Mr. Nomad's behalf.
III). request a check be issued to him so that he can send Mr. Nomad some money.

I only
I and II only
I, II, and III
none of the above. Only a relative can hold a power of attorney to engage in financial transactions for the grantor.

Answer(s): B

Explanation:

Mr. Nomad's friend can engage in the activities described in Selections I and II only. A limited power of attorney gives Mr. Nomad's friend the authority to buy and sell securities
on Mr. Nomad's behalf, but not to make any cash withdrawals. He would need a full power of attorney to be able to do so.

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Free Series 6 Exam Braindumps (page: 3)

QUESTION: 9

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QUESTION: 11

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