1. A personal savings plan that gives you tax advantages for setting aside money for retirement.

a. Individual Retirement Account (IRA).
b. Regular savings account.
c. Capital gains dividend
d. Interest bearing account.

2. What would be a tax advantage of an Individual Retirement Account (IRA)?

a. Contributions you make to an IRA may be fully or partially deductible.
b. Amounts in your IRA are not taxed until distributed.
c. Sometimes amounts are not taxed at all if distributed according to the rules.
d. all of the above.

3. Generally, the most that can be contributed to your traditional IRA for 2007 is the smaller of your compensation for the tax year or

a. $2,000.
b. $3,500.
c. $4,000.
d. $1,500.

4. If you reached age 50 before 2008, the most that can be contributed to your traditional IRA for 2007 is the smaller or your compensation for the year or

a. $2,500.
b. $4,375.
c. $5,000.
d. $1,875.

5. For 2007, if you are single and are covered by a retirement plan at work, your deduction for contributions to a traditional IRA will be reduced if your modified AGI is

a. more than $53,000 but less than $63,000.
b. more than $45,000 but less than $55,000.
c. more than $-0- but less than $10,000.
d. more than $85,000 but less than $105,000.

6. A non taxable qualified distribution is any payment or distribution from your Roth IRA that meets the following requirement.

a. It is made after the 5-year period beginning with the first taxable year for which a contribution was made to a Roth IRA set up for you benefit.
b. The payment or distribution is made on or after the date you reach age 59 1/2.
c. The payment or distribution is made to a beneficiary or to your estate after your death.
d. All of the above.

7. If you make the rollover contribution by the 60th day after the day you receive the distribution, the rollover is

a. taxable.
b. not valid.
c. tax free.
d. disqualified.

8. You can convert a traditional IRA to a Roth IRA. The conversion is treated as a rollover, regardless of the conversion method used. You can convert amounts from a traditional IRA to a Roth IRA in the following way.

a. Rollover.
b. Trustee-to-trustee transfer.
c. Same trustee transfer.
d. all of the above.

9. Generally, if you are under age 59 1/2, you must pay an additional tax on the distribution of any assets from your traditional IRA. This is a

a. 5% additional tax.
b. 10% additional tax.
c. 15% additional tax.
d. 28% additional tax.

10. You do not have to pay the additional tax on distribution even if you receive distributions before you reach age 59 1/2 if

a. you receive distributions as part of a series of substantially equal payments.
b. your payments are changed before the date you reached age 59 1/2.
c. your payments are changed before 5 years after the first payment.
d. none of the above.

11. You can set up and make contributions to a traditional IRA if

a. you receive taxable compensation during the year.
b. you were not age 70 1/2 by the end of the year.
c. you are covered or not covered by any other retirement plan.
d. all of the above.

12. The following is compensation for IRA purposes only if shown in box 1 of Form W-2.

a. Self-employment income.
b. Commissions.
c. Scholarship and fellowship payments.
d. Alimony and separate maintenance.

13. The following is not compensation for IRA purposes.

a. Earnings and profits from property.
b. Any amounts (other than combat pay) you exclude from income.
c. both a and b.
d. none of the above.

14. A SIMPLE plan is a tax-favored retirement plan that certain small employers (including self-employed individuals) can set up for the benefit of their employees. A SIMPLE plan is a written agreement (salary reduction agreement) between you and your employer that allows you, if you are an eligible employee (including a self-employed individual)), to choose to

a. Reduce your compensation (salary) by a certain percentage each pay period.
b. Have your employer contribute the salary reductions to a SIMPLE IRA on your behalf.
c. Make contributions to any type of IRA; SIMPLE IRA, Regular IRA, Roth IRA, etc.
d. Both a and b are correct.

15. Even if you are under age 59 1/2, if you paid expenses for higher education during the year,

a. You still need to paid the 10% additional tax for early withdrawal of your IRA account.
b. The expenses don't count for any special breaks and you must pay the 10% additional tax.
c. Part (or all) of any distribution may not be subject to the 10% additional tax.
d. None of the above.

16. A written arrangement that allows your employer to make deductible contributions to a traditional IRA set up for you to receive such contributions is

a. an Individual Retirement Account.
b. an Individual Retirement Annuity.
c. an Individual Retirement Bond.
d. a Simplified Employee Pension (SEP).

17. At least 7 days before you set up your IRA, the trustee or issuer of your traditional IRA generally must give you

a. an authentic IRA certificate.
b. trustee-to-trustee transfer.
c. a disclosure statement.
d. an appropriate IRS form.

18. Fred, a college student working part time, earns $1,800 in 2007. His IRA contributions for 2007 are limited to

a. $3,500.
b. 100% of his compensation.
c. $4,000.
d. none of the above.

19.  George, a single taxpayer (age 42), has W-2 income for $31,000. During the 2007 tax year he contributed $4,500 to his traditional IRA. George has excess contributions for how much?

a. $2,500.
b. $ -0-.
c. $500.
d. $1,500.

20. If you invest in an annuity or endowment contract under an individual retirement annuity, no more than $4,000 ($5,000 if 50 or older) can be contributed toward its cost for the tax year, including the cost of life insurance coverage. If more than this amount is contributed, the annuity or endowment contract

a. is carried over to the next year.
b. is disqualified.
c. is increased and a greater deduction used.
d. increased in value only.

21. If you file a joint return and your taxable compensation is less than that of your spouse, the most that can be contributed for the year to your IRA is

a. $4,000 ($5,000 if you are 50 or older).
b. total compensation includable in the gross income of both you and your spouse for the year.
c. the smaller of a and b.
d. none of the above.

22. Contributions can be made to your traditional IRA for each year that you receive compensation and have not reached age 70 1/2. For Federal purposes, in any tax year in which you do not work, contributions cannot be made to your IRA unless

a. you receive alimony or file a joint return with a spouse who has compensation.
b. you file your return claiming a traditional IRA contribution before the contribution is actually made.
c. you make the contribution by the due date of your return, not including extensions.
d. you were covered for any part of the year by an employer retirement plan.

23. A plan that provides for a separate account for each person covered by the plan is

a. a defined contribution plan.
b. a vested interest plan.
c. a defined benefit plan.
d. a reservist plan.

24. To designate contributions as non-deductible, you must file

a. Form 8910.
b. Form 8606.
c. Form 2106.
d. Form 2210.

25. A prohibited transaction is any improper use of your traditional IRA account or annuity by you, your beneficiary, or any qualified person. The following is an example of a prohibited transaction with a traditional IRA.

a. Borrowing money form it.
b. Selling property to it.
c. Using it as a security for a loan.
d. all of the above.

26. If you inherit a traditional IRA from your spouse, you generally can

a. treat it as your own by designating yourself as the account owner.
b. treat it as your own by rolling it over into your traditional IRA, or to the extent it is taxable.
c. treat yourself as the beneficiary rather than treating the IRA as your own.
d. Any of the above.

27. You will be considered to have chosen to treat an inherited IRA as your own if contributions are made to the inherited IRA, or

a. you don't have an unlimited right to withdraw amounts.
b. you do not take the required minimum distribution for a year as a beneficiary of the IRA.
c. if you inherit the IRA from anyone other than your deceased spouse.
d. if you fail to file Form 8606.

28. To be a Roth IRA, the account or annuity must be designated as a Roth IRA when it is set up. A deemed IRA can be a Roth IRA, but neither a SEP-IRA nor a SIMPLE IRA can be designated as a Roth IRA. Unlike a traditional IRA, with a Roth IRA

a. you can deduct contributions to a Roth IRA.
b. you cannot deduct contributions to a Roth IRA.
c. contributions are taxable.
d. contributions cannot be made after you reach age 70 1/2.

29. You can make catch-up contributions in certain employer bankruptcies if you participated in a 401(k) plan and the employer who maintained the plan went into bankruptcy, you may be able to contribute an additional $3,000 to your Roth IRA, if

a. You have participated in a 401(k) plan under which the employer matched at least 50% of your contributions to the plan with stock of the company.
b. You must have been a participant in the 401(k) plan 6 months before the employer went into bankruptcy and the employer must have been a debtor in a bankruptcy case in an earlier year.
c. Your employer (or any other person) must have been subject to indictment or conviction based on business transactions related to the bankruptcy.
d. All of the above.

30. Norah, a single taxpayer (age 39), has W-2 income for $47,000. During the 2007 tax year she contributed $4,500 to her Roth IRA. Which of the following is true?

a. Norah can contribute up to $4,500 to her Roth IRA account.
b. Norah has to pay a 6% excise tax for the excess contribution to the Roth IRA.
c. Norah can withdraw her excess contribution only after the due date of filing her return.
d. Norah is not able to apply the excess contributions to the following year.

31. Generally, if you are under age 59 1/2, you must pay an additional tax on the distribution of any assets from your traditional IRA. This is a

a. 1 1/2% additional tax California.
b. 2 1/2% additional tax California.
c. 3 1/2% additional tax California.
d. 7% additional tax California.

32. Fred, a college student working part time, earns $1,800 in 2007. His IRA contributions for 2007 are limited to

a. $4,000.00
b. $1,800.00
c. $5,000.00
d. none of the above.

33. Rodolfo, who is 39 years old and single, earns $31,000 of which $2,000 is California income in 2007. His IRA contributions for 2007 are limited to

a. $2,500.00
b. $31,000.00
c. $2,000.00
d. $1,500.00

34. If your pension plan invested in U.S. government securities or in mutual funds that invested in U.S. Government securities, you may reduce the taxable portion of your pension distribution by the amount of interest attributable to the U.S. Government securities.                       

True False

35. Even if you receive a distribution before you are age 59 1/2, you may not have to pay the  2 1/2 % additional tax for California  if

a. You use your distributions of up to $10,000 for first home purchase (applies only to IRAs).
b. You use the distributions for qualified higher education expenses (applies only to IRAs).
c. The distributions made to you are to the extent of your medical expenses deductible under IRC Section 213 (does not apply to modified endowment contract).
d. Any of the above.

36. The California treatment of pension and annuity income is generally the same as the federal treatment. The following are treated differently by federal and California except

a. Social Security and railroad retirement benefits.
b. Retirees using the "Three-Year Rule" whose annuity date was after 7/1/1986 and before 1/1/1987.
c. Some prior-year IRA deductions and Health Savings Accounts (HSAs).
d. IRA rollovers.

37. Make an adjustment to exclude any of this income if it was included in your federal AGI. California law differs from federal law in that California does not tax

a. Social Security benefits.
b. Tier 1 and Tier 2 railroad benefits.
c. Sick pay benefits under the railroad unemployment Insurance Act.
d. All of the above.

38.  You may also owe tax on early distributions from an IRA or SEP if you enter into a prohibited transaction. If you enter into a prohibited transaction,

a. Your IRA ceases to be an IRA on the first day of the taxable year.
b. You are considered to have received a distribution on the entire value of your IRA.
c. If you are under 59 1/2 on the first day of the taxable year, you are subject to the tax on early distributions.
d. All of the above.

39. The "Three-Year Rule" was repealed for retirees whose annuity starting date is after 12/31/86. However, if your annuity starting date was before 1/1/87, and you elected to use the "Three-Year Rule," you must

a. Stop using this method for tax year 2007.
b. Continue using this method for tax year 2007.
c. Postpone using this method until tax year 2008.
d. None of the above.

40. You are a California resident receiving your military pension. You served 20 years in the military. You were never stationed in California during your military career. You military pension included in federal AGI is $30,000.

a. Your military pension of $30,000 is taxable by California even though your pension does not have a California source.
b. As a California resident, you are taxed on all income from all sources.
c. Your pension does not have a California source so you are not taxed on this income in California.
d. Both a and b are correct.