Question

1. If an individual (or spouse) is an active participant in an employer-sponsored retirement plan, he or she cannot make a deductible IRA contribution.

True or False

2. If only one spouse is employed, and that spouse is not covered under an employer-sponsored retirement plan, then the non-working spouse can make a deductible contribution to his or her own IRA.

True or False

3. With a Roth IRA, contributions are deductible, the account grows tax-free, and distributions are not taxable.

True or False

4. A participant has an adjusted basis of zero in any nondeductible contributions to a traditional IRA.

True or False

5. Contributions to a Coverdell Education Savings Account can only be made by the parents or grandparents of a child under the age of 18.

True or False

6. Annually, up to $2,000 per beneficiary can be contributed to a Coverdell Education Savings Account

True or False

Answer 1

Q1. If an individual (or spouse) is an active participant in an employer-sponsored retirement plan, he or she cannot make a deductible IRA contribution.

Ans:TRUE. One can make deductible contributions only if neither of spouse is covered under employer-sponsored retirement plan.

Q2. If only one spouse is employed, and that spouse is not covered under an employer-sponsored retirement plan, then the non-working spouse can make a deductible contribution to his or her own IRA.

Ans:TRUE. If one spouse is not covered under an employer-sponsored retirement plan then the other non working spouse can make deductible contribution.

Q3. With a Roth IRA, contributions are deductible, the account grows tax-free, and distributions are not taxable.

Ans:FALSE. One can never deduct Contributions made to Roth IRA, but earnings are typically tax free. This can be done only in Traditional IRA.

Q4. A participant has an adjusted basis of zero in any nondeductible contributions to a traditional IRA

Ans:FALSE. A participant has an adjusted basis of zero only in Deductible contributions to a traditional IRA.

Q5.  Contributions to a Coverdell Education Savings Account can only be made by the parents or grandparents of a child under the age of 18

Ans:FALSE. Any individual may make contributions to this account. including parenst, grandparents and even beneficiaries themselves.And also any Trust or corporation can also make contributions to the beneficiary.

Q6.Annually, up to $2,000 per beneficiary can be contributed to a Coverdell Education Savings Account

Ans: TRUE. The beneficiary may be having any number of Accounts but the Contributions made to a beneficiary should not exceed $2000 (Cumulative total of all the accounts)