CRPC DAMAGE CONTROL :TEST 1 AND 2 EXAM 2024 WITH QUESTIONS AND
CORRECT VERIFIED ANSWERS WITH RATIONALE |ALREADY GRADED A+
This year, your 63-year-old client had $17,025 of earned income and $30,000 of investment
income. He was also drawing Social Security benefits. Which one of the following correctly
describes the impact on his Social Security benefits?
He loses $1 of benefits for every $1 above the "allowable limit."
He loses $1 of benefits for every $2 above the "allowable limit."
He loses $1 of benefits for every $3 above the "allowable limit."
#$
There is no reduction to his benefits. - (ANSWER)There is no reduction to his benefits. %
^
The client's earnings (earned income) are below the allowable limit for the current year &*
($17,640 for 2019). Remember that according to the work penalty rule, only earned income ()_
is counted toward the "allowable limit." +
(LO 3-3)
Which one of the following is correct regarding tax-exempt interest and the taxation of
Social Security benefits?
None of the tax-exempt interest is included in the computation of the taxation of Social
Security benefits.
50% of the tax-exempt interest is included in the computation of the taxation of Social
Security benefits.
85% of the tax-exempt interest is included in the computation of the taxation of Social
Security benefits.
All of the tax-exempt interest is included in the computation of the taxation of Social
Security benefits. - (ANSWER)All of the tax-exempt interest is included in the computation
of the taxation of Social Security benefits.
All tax-exempt interest income is included in computing the portion of Social Security
benefits that are subject to taxation. Tax-free Roth distributions are not counted when
determining provisional income. A maximum of 85% of the Social Security benefits are
subject to taxation.
(LO 3-3)
Sam, age 62, begins receiving his Social Security income. His PIA is $1,500 per month.
Because he has filed at age 62, his payment will be reduced by 25% to $1,125. His wife
,CRPC DAMAGE CONTROL :TEST 1 AND 2 EXAM 2024 WITH QUESTIONS AND
CORRECT VERIFIED ANSWERS WITH RATIONALE |ALREADY GRADED A+
Linda, age 67, would like to begin spousal benefits. Her monthly income would be -
(ANSWER)$750.00.
Because Linda has attained FRA, she would be eligible for 50% of Sam's full PIA, or
$750.00.
(LO 3-4)
Over a period of 10 years, Mark Edmunds contributed a total of $20,000 to a nondeductible
IRA. The current value of Mark's IRA is $40,000, and Mark, who is now age 45, has decided
to use all of his IRA assets for the down payment on a second home. Assuming Mark's
marginal tax bracket is 35%, how much does he owe in taxes? - (ANSWER)$9,000
#$
Mark's effective tax rate is 45%; i.e., 35% plus the 10% early withdrawal penalty. 45% × %
$20,000 tax-deferred earnings = $9,000. The $20,000 basis in the IRA is not subject to ^
income tax or the early withdrawal penalty. &*
()_
Harry, a single professor who is age 36, started his Roth IRA three years ago, contributing +
$5,000. He has since made a contribution of $5,500 each year and converted a traditional
IRA of $17,000 to the Roth IRA last year. His total contributions are $16,000 plus the
$17,000 conversion, and the account is now worth $36,497. Harry would like to make a
complete withdrawal so that he can buy a new car. He wants to know what his options are
and what the tax consequences would be. Which one of the following statements would be
the correct information for Harry? - (ANSWER)If a withdrawal of converted IRA funds is
made from the Roth account subsequent to the conversion but before five years has
elapsed, such a withdrawal may be subject to the 10% penalty.
Contribution amounts always come out of a Roth IRA account first, and then conversion
amounts, if any. Because taxes have already been paid on these amounts, there are no
income taxes. In this case, Harry can withdraw up to $33,000 income-tax-free. If he
withdrew all $36,497 he would only owe income taxes on $3,497. However, if a withdrawal
of converted IRA funds is made from the Roth account subsequent to the conversion but
before five years has elapsed, such a withdrawal may be subject to the 10% penalty. Thus,
he would be subject to the 10% early withdrawal penalty on the $17,000 from last year's
conversion. If the Roth IRA earnings are withdrawn and the distribution is not "qualified,"
the earnings will be subject to income taxation and may be subject to the 10% penalty. If he
withdrew the entire amount, he would owe income tax on $3,497 and the 1% early
withdrawal penalty on $20,497.
(LO 7-4)
The vested accrued benefit in George's tax-sheltered annuity is $87,500. He has never
taken a loan from the plan but is interested in building an addition to his home. Which of
the following statements correctly describes George's option? - (ANSWER)The amount of
the loan would be limited to $43,750 and the term would be limited to five years.
, CRPC DAMAGE CONTROL :TEST 1 AND 2 EXAM 2024 WITH QUESTIONS AND
CORRECT VERIFIED ANSWERS WITH RATIONALE |ALREADY GRADED A+
George wants to remodel, not purchase, his home. The amount of the loan cannot exceed
50% of the vested amount in George's account, and the term of the loan would be limited
to five years.
(LO 7-1)
An income-tax-penalty-free distribution cannot be made from a tax-sheltered annuity (TSA)
until the employee does which of the following?
I. separates from service after attaining age 55
II. attains age 55
#$
III. becomes disabled or dies
IV. takes a distribution under most hardship withdrawal rules - (ANSWER)I, and III only %
^
Penalty-free distributions can be made from a TSA or 401(k) when an employee separates &*
from service after attaining age 55, attains age 59½, becomes disabled or dies, or takes a ()_
hardship distribution for deductible medical expenses only. All other hardship withdrawals +
are subject to early withdrawal penalty rules. Attaining age 55 means the worker is 55 on
December 31 of the year of separation—not that the worker was 55 on the day of
separation.
A springing durable power of attorney - (ANSWER)gives the attorney-in-fact authority only
when the principal becomes incompetent.
The very purpose of any durable power of attorney is to give the attorney-in-fact authority to
act after the principal becomes incapacitated. However, such authority does not survive
the principal's death. Such authority is created in an independent document (not part of a
living will), and is effective immediately in this type of power of attorney. A springing durable
power of attorney becomes effective when the principal becomes incompetent or
incapacitated.
(LO 5-2)
A Medicare Part A patient must pay
all costs for a hospital stay beyond 150 days.
the annual deductible for out-of-hospital doctor's services.
all costs above the hospital deductible for a 30-day stay in a hospital.
the approved costs of care in a skilled nursing facility for the first 10 days. - (ANSWER)all
costs for a hospital stay beyond 150 days.
The patient must pay all costs related to a hospital stay beyond 150 days. Answer b. is
wrong because it describes a gap in Medicare Part B coverage, not Part A. Answer c. is
CORRECT VERIFIED ANSWERS WITH RATIONALE |ALREADY GRADED A+
This year, your 63-year-old client had $17,025 of earned income and $30,000 of investment
income. He was also drawing Social Security benefits. Which one of the following correctly
describes the impact on his Social Security benefits?
He loses $1 of benefits for every $1 above the "allowable limit."
He loses $1 of benefits for every $2 above the "allowable limit."
He loses $1 of benefits for every $3 above the "allowable limit."
#$
There is no reduction to his benefits. - (ANSWER)There is no reduction to his benefits. %
^
The client's earnings (earned income) are below the allowable limit for the current year &*
($17,640 for 2019). Remember that according to the work penalty rule, only earned income ()_
is counted toward the "allowable limit." +
(LO 3-3)
Which one of the following is correct regarding tax-exempt interest and the taxation of
Social Security benefits?
None of the tax-exempt interest is included in the computation of the taxation of Social
Security benefits.
50% of the tax-exempt interest is included in the computation of the taxation of Social
Security benefits.
85% of the tax-exempt interest is included in the computation of the taxation of Social
Security benefits.
All of the tax-exempt interest is included in the computation of the taxation of Social
Security benefits. - (ANSWER)All of the tax-exempt interest is included in the computation
of the taxation of Social Security benefits.
All tax-exempt interest income is included in computing the portion of Social Security
benefits that are subject to taxation. Tax-free Roth distributions are not counted when
determining provisional income. A maximum of 85% of the Social Security benefits are
subject to taxation.
(LO 3-3)
Sam, age 62, begins receiving his Social Security income. His PIA is $1,500 per month.
Because he has filed at age 62, his payment will be reduced by 25% to $1,125. His wife
,CRPC DAMAGE CONTROL :TEST 1 AND 2 EXAM 2024 WITH QUESTIONS AND
CORRECT VERIFIED ANSWERS WITH RATIONALE |ALREADY GRADED A+
Linda, age 67, would like to begin spousal benefits. Her monthly income would be -
(ANSWER)$750.00.
Because Linda has attained FRA, she would be eligible for 50% of Sam's full PIA, or
$750.00.
(LO 3-4)
Over a period of 10 years, Mark Edmunds contributed a total of $20,000 to a nondeductible
IRA. The current value of Mark's IRA is $40,000, and Mark, who is now age 45, has decided
to use all of his IRA assets for the down payment on a second home. Assuming Mark's
marginal tax bracket is 35%, how much does he owe in taxes? - (ANSWER)$9,000
#$
Mark's effective tax rate is 45%; i.e., 35% plus the 10% early withdrawal penalty. 45% × %
$20,000 tax-deferred earnings = $9,000. The $20,000 basis in the IRA is not subject to ^
income tax or the early withdrawal penalty. &*
()_
Harry, a single professor who is age 36, started his Roth IRA three years ago, contributing +
$5,000. He has since made a contribution of $5,500 each year and converted a traditional
IRA of $17,000 to the Roth IRA last year. His total contributions are $16,000 plus the
$17,000 conversion, and the account is now worth $36,497. Harry would like to make a
complete withdrawal so that he can buy a new car. He wants to know what his options are
and what the tax consequences would be. Which one of the following statements would be
the correct information for Harry? - (ANSWER)If a withdrawal of converted IRA funds is
made from the Roth account subsequent to the conversion but before five years has
elapsed, such a withdrawal may be subject to the 10% penalty.
Contribution amounts always come out of a Roth IRA account first, and then conversion
amounts, if any. Because taxes have already been paid on these amounts, there are no
income taxes. In this case, Harry can withdraw up to $33,000 income-tax-free. If he
withdrew all $36,497 he would only owe income taxes on $3,497. However, if a withdrawal
of converted IRA funds is made from the Roth account subsequent to the conversion but
before five years has elapsed, such a withdrawal may be subject to the 10% penalty. Thus,
he would be subject to the 10% early withdrawal penalty on the $17,000 from last year's
conversion. If the Roth IRA earnings are withdrawn and the distribution is not "qualified,"
the earnings will be subject to income taxation and may be subject to the 10% penalty. If he
withdrew the entire amount, he would owe income tax on $3,497 and the 1% early
withdrawal penalty on $20,497.
(LO 7-4)
The vested accrued benefit in George's tax-sheltered annuity is $87,500. He has never
taken a loan from the plan but is interested in building an addition to his home. Which of
the following statements correctly describes George's option? - (ANSWER)The amount of
the loan would be limited to $43,750 and the term would be limited to five years.
, CRPC DAMAGE CONTROL :TEST 1 AND 2 EXAM 2024 WITH QUESTIONS AND
CORRECT VERIFIED ANSWERS WITH RATIONALE |ALREADY GRADED A+
George wants to remodel, not purchase, his home. The amount of the loan cannot exceed
50% of the vested amount in George's account, and the term of the loan would be limited
to five years.
(LO 7-1)
An income-tax-penalty-free distribution cannot be made from a tax-sheltered annuity (TSA)
until the employee does which of the following?
I. separates from service after attaining age 55
II. attains age 55
#$
III. becomes disabled or dies
IV. takes a distribution under most hardship withdrawal rules - (ANSWER)I, and III only %
^
Penalty-free distributions can be made from a TSA or 401(k) when an employee separates &*
from service after attaining age 55, attains age 59½, becomes disabled or dies, or takes a ()_
hardship distribution for deductible medical expenses only. All other hardship withdrawals +
are subject to early withdrawal penalty rules. Attaining age 55 means the worker is 55 on
December 31 of the year of separation—not that the worker was 55 on the day of
separation.
A springing durable power of attorney - (ANSWER)gives the attorney-in-fact authority only
when the principal becomes incompetent.
The very purpose of any durable power of attorney is to give the attorney-in-fact authority to
act after the principal becomes incapacitated. However, such authority does not survive
the principal's death. Such authority is created in an independent document (not part of a
living will), and is effective immediately in this type of power of attorney. A springing durable
power of attorney becomes effective when the principal becomes incompetent or
incapacitated.
(LO 5-2)
A Medicare Part A patient must pay
all costs for a hospital stay beyond 150 days.
the annual deductible for out-of-hospital doctor's services.
all costs above the hospital deductible for a 30-day stay in a hospital.
the approved costs of care in a skilled nursing facility for the first 10 days. - (ANSWER)all
costs for a hospital stay beyond 150 days.
The patient must pay all costs related to a hospital stay beyond 150 days. Answer b. is
wrong because it describes a gap in Medicare Part B coverage, not Part A. Answer c. is
