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IRA contributions, early withdrawal penalty

Mr. Knox wants to make contributions to an IRA (spousal IRA) for his wife. For Mr. Knox to be eligible to make such contributions, which of the following requirements must be met?

I. They must file a joint return for the tax year.
II. He must have compensation that must be included in his income for the tax year.
III. She must have earned income.

A. I only
B. II only
C. III only
D. I and II only
E. I, II, and III

Gerald, age 50, withdrew $10,000 from his IRA to pay for the graduate school expenses of his son. His son's educational expenses were $10,000 and he received a $2,000 scholarship from the university to help reduce these expenses. What amount of the withdrawal from the IRA is subject to the 10% early withdrawal penalty?

A. $1,000
B. $8,000
C. $2,000
D. $0

Solution Preview

Mr. Knox wants to make contributions to an IRA (spousal IRA) for his wife. For Mr. Knox to be eligible to make such contributions, which of the following requirements must be met?

I. They must file a joint return for the tax year.
II. He must have compensation that must be included in his income for the tax year.
III. She must have earned income.

A. I only
B. II only
C. III only
D. I and II only
E. I, II, and III

D. The wife does not have to have earned income.

Spousal IRAs

If you file a joint return, you and your spouse can each make IRA contributions even if only one of you has taxable compensation. The amount of your combined contributions can't be more than the taxable compensation reported on your joint return. It doesn't matter which spouse earned the ...

Solution Summary

A sentence or two is given for each questions supporting the selection.

$2.19