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Intermediate
Planning Intermediate:
Tax Sheltering
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1.
Which of the following is not true about Keogh plans?
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They are retirement plans for the self-employed and their employees.
The plan owner controls the plan's investments.
Earnings may be withdrawn before age 59 1/2 without penalty.
Earnings may be withdrawn before age 59 1/2 without penalty. This is not true of Keogh plans.
2.
Income earned from wages is taxed as passive income.
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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.
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True
False
False. Losses from a limited partnership can only be deducted from income earned from passive activity earnings.
4.
Tax avoidance is illegal.
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True
False
False. Tax avoidance is perfectly proper. Tax evasion is illegal.
5.
Which of the following is true about the tax advantages of tax-free municipal bonds?
Choose wisely. There is only one correct answer.
They are free from all taxation.
They are free from state taxation.
They are generally free from federal taxation.
The are free from capital gains taxes.
They are generally free from federal taxation. Tax-free municipal bonds are not, however, free from capital gains taxes.
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