Question

Question 9 1pts Terry and Nancy are both age 39 and each plan to contribute $5,500 to their traditional IRAs for the 2018 tax year. They are both employed and file a joint income tax return. However, only Terry is eligible for and participates in his employer's qualified retirement plan. Terry and Nancy's modified AGI and earned income for the year 2018 is 599,000. What amount, if any, can Nancy deduct for her IRA contribution? . $200 $5,500 $4,400 $2,500 D Question 10 1 pts In considering whether to convert a traditional IRA to the Roth IRA form, which of the following is a valid consideration? If the taxpayer anticipates being in a lower tax bracket at date of distribution from the Roth IRA, it generally makes sense to convert. It is generally advantageous if the converted assets will remain in the Roth IRA for a relatively short period of time before withdrawal If the source of payment for taxes due upon conversion comes from an outside source. It generally is advantageous to convert. If the taxpayer files as married filing separately and thereby splits income, it generally makes sense to convert.

Answer 1

Question 9 -

There are no income limits for Traditional IRAs The limit on traditional IRA contributions for the year 2018 is $5500 below the age of 50. Moreover, Nancy is not covered by the employer benefit plan, which does not put any limit on deducting her contribution of $5500.

Other options seem irrelevant.

Question 10-

Option 1 is incorrect - because if you think you will retire in a lower income tax bracket than the current one, you will pay higher taxes on the conversion than you would if you were to withdraw the money from your traditional IRA at retirement. It does not make any sense to convert.

Option 2 is incorrect - because the money taken out of Traditional IRA to pay conversion taxes would be considered a distribution. This could result in even higher taxes in the year of conversion. Keeping it for short period will lose the chance for that money to compound and grow tax-free in Roth IRA—which means less money when you need it in retirement.

Option 4 is incorrect - Roth contributions are in post-tax dollars, which means they are not deductible at the time of contribution. Both the contribution and the profits are exempt from federal taxes and most state taxes. Hence splitting of income is not a motivation to convert.

Option 3 is correct - because conversion will be considered as distribution and hence taxed. So if the taxes are being sourced by an outside income, and the money in Roth IRA shall grow tax-free. Hence, it will be advantageous to convert.