Tom and Martha Holt Case Study., Finance Basics

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Which of the following retirement plan alternatives would allow Tom the greatest deductible contribution while providing him with only a small cash flow commitment each year based on 2014 plan contribution limits? (Points : 5)
SEP plan
Defined benefit plan
Section 401(k) plan
Profit-sharing plan

Question 2. 2. Tom is interested in adopting a retirement plan for his business. His primary goals are to contribute the maximum amount allowable to his tax-deferred savings and to minimize the expense and paperwork associated with the plan. Which of the following retirement plans would you recommend for Tom’s business? (Points : 5)
SIMPLE IRA
Defined benefit plan
Simplified employee pension (SEP) plan
Profit-sharing plan

Question 3. 3. Martha has been impressed with the appreciation of the coin collection she received as a gift from her mother and would like to take advantage of this by using coins as an investment in the IRAs. Which of the following statements regarding coins as investments in IRAs is CORRECT? (Points : 5)
American Eagle gold coins are permitted IRA assets.
No more than 25% of Martha’s IRA assets may be invested in coins.
Martha should approach her coin dealer and ask that a collection similar to the collection her mother gave her be created as an investment for the IRAs.
Any government-issued gold coins, such as Krugerrands and American Eagles, are appropriate for IRA investment.

Question 4. 4. Assume the Holts made a $13,000 contribution ($6,500 each) to their traditional IRA accounts for 2014. What is the maximum amount of their deductible IRA contributions for 2014? (Points : 5)
$5,500
$6,500
$11,000
$13,000

Question 5. 5. Which of the following (is)are characteristics of Martha’s TSA Section 403(b) plan?
I. Martha’s maximum contribution is $17,500 for 2014.
II. 10-year forward averaging is available for lump-sum distributions.
III. Rollovers to IRAs are permitted. (Points : 5)
I and II
I and III
II and III
III only

Question 6. 6. As a beneficiary, who is the primary user of the stretch IRA rules? (Points : 5)
Adult child
Surviving spouse
Decedent’s estate
Qualified charity

Question 7. 7. Tom has decided to open a 2nd coat store in a nearby suburb. He has decided to offer a Section 401(k) profit-sharing plan to employees at the original store, but not at the 2nd store. The purpose of the retirement plan is to fund Tom’s retirement, not to retain employees. Which of the following statements is(are) CORRECT?
I. This is allowed under the permitted disparity rules.
II. This is not allowed because the 2 stores are affiliated through common ownership.
III. This is allowed because it is a personal retirement savings vehicle.
IV. Tom is required to offer the plan to all employees who meet the eligibility rules for the qualified plan. (Points : 5)
I only
I and III
II only
II and IV

Question 8. 8. Given Uncle Stirling’s failing health, Martha has been thinking about the decisions she will need to make as the sole beneficiary of Stirling’s $1 million IRA. She is a little overwhelmed at the amount and wants to ensure she ultimately uses these funds wisely for her and Tom’s retirement. Which of the following will be an option for Martha upon Stirling’s death? (Points : 5)
She can elect 10-year forward averaging because Uncle Stirling was eligible to use it.
She can use a direct trustee-to-trustee transfer into an IRA and defer any minimum distributions until she is age 70½.
She can use a direct trustee-to-trustee transfer into an IRA but may not begin taking distributions without a penalty until she is age 59½.
She can use a direct trustee-to-trustee transfer into an inherited IRA but must begin to take distributions over her remaining life expectancy.

Question 9. 9. Tom’s ex-wife, Dorinda, finds she doesn’t really need the money she gets from Tom as part of the divorce agreement. She wants to save the alimony for her retirement years. What is the amount that Dorinda can contribute to a traditional IRA? (Points : 5)
$0
$2,400
$3,600
$5,500

Question 10. 10. What is the minimum number of employees that a defined benefit plan must cover to conform to IRS regulations? (Points : 5)
50 employees
The lesser of 50 employees or 40% of all eligible employees
The lesser of 40 employees or 50% of all employees
The lesser of 50 employees or 50% of all employees

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