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Planning Intermediate:
Tax Sheltering
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Choose wisely. There is only one correct answer to each question.
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1.
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.
2.
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.
3.
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 Earnings on annuity contributions are TAX-DEFERRED until withdrawn.
4.
In a tax swap, an investor sells a security that has made a capital gain and buys another similar security.
Choose wisely. There is only one correct answer.
True
False
False. In a tax swap, an investor sells a security that has incurred a capital loss and buys another similar security.
5.
Tax avoidance is illegal.
Choose wisely. There is only one correct answer.
True
False
False. Tax avoidance is perfectly proper. Tax evasion is illegal.
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