QUESTION: 209

A tax shelter specifically designed for small employers is:

an IRA
a SIMPLE
a subsidized deferral plan
a Shelter Island plan

Answer(s): B

Explanation:

a SIMPLE. IRAs are for any individuals, not just small employers. The other choices do not exist.

Bubba Corporation has a profit sharing plan. The company president, Bubba, is receiving the maximum plan contribution amount. The corporation has one other employee, who is eligible for the plan.
If this person earns $12,000 per year, how much must be deposited in the plan for the employee?

$6,000
$3,000
$1,800
$12,000

Answer(s): B

Explanation:

$3,000. The maximum contribution is 25% of compensation. That percentage of $12,000 is $3,000.

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QUESTION: 211

Bubba is age 54 and has investments in a retirement plan with his former employer valued at $104,500. Bubba withdraws $25,000 to open a retail clothing store.
Which of the following statements is true regarding Bubba’s tax consequences?

the entire account is terminated and $104,500 is immediately taxable
a penalty of 10% of the withdrawn amount is assessed
a penalty of 10% on all assets in Bubba’s account is assessed
only regular income tax is due on the amount withdrawn

Answer(s): B

Explanation:

a penalty of 10% of the withdrawn is assessed. Bubba also owes regular income tax on the withdrawn amount in addition to the 10% penalty for early withdrawal.

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QUESTION: 212

Bubba is eligible for a Roth IRA. He may convert his SEP-IRA to a Roth IRA:

without restriction
only after the two-year holding period
after a 90-day holding period
not ever

Answer(s): A

Explanation:

without restriction. A SEP-IRA may be converted to a Roth IRA. The two-year holding period applies to SIMPLE-IRAs.

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Free SERIES 7 Exam Braindumps (page: 54)

QUESTION: 209

Explanation:

QUESTION: 210

Explanation:

QUESTION: 211

Explanation:

QUESTION: 212

Explanation:

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