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Planning Intermediate:
Tax Sheltering
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1.
Which of the following is not true about 401(k) plans?
Choose wisely. There is only one correct answer.
Earnings from the plans are tax-deferred until retirement.
Contributions to traditional 401k's are made with pre-tax earnings.
Employees are limited to only one option for investing the money in their plans.
In most plans, employers match employee contributions.
Employees are limited to only one option for investing the money in their plans. This is not true of 401(k) plans.
2.
Income earned from wages is taxed as passive income.
Choose wisely. There is only one correct answer.
True
False
False. Income earned from wages is taxed as active income.
3.
Losses from a limited partnership can always be deducted from your salary income.
Choose wisely. There is only one correct answer.
True
False
False. Losses from a limited partnership can only be deducted from income earned from passive activity earnings.
4.
Earnings on annuity contributions are tax-free.
Choose wisely. There is only one correct answer.
True
False
False. Earnings on annuity contributions are TAX-DEFERRED until withdrawn.
5.
Paying your taxes in a future tax period rather than now is called _______.
Choose wisely. There is only one correct answer.
Tax evasion
Tax avoidance
Tax deferral
Tax credit
Tax deferral. Tax deferral is among the most popular reasons for investing.
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DONE