Answer the following statements true (T) or false (F)
1. Under the Pension Model, the entire accumulation, not just the earnings, is taxed at the end of the investment horizon.
2. The Deferred Model offers two levels of tax deferral—the original contribution escapes current taxation as do the earnings on the underlying investment.
3. Employer-sponsored qualified retirement plans and deductible IRAs fit the Pension Model.
4. When given a choice between making a contribution to a Roth IRA or to a nondeductible traditional IRA, the taxpayer should choose the Roth IRA.
5. As long as the rollover from a traditional IRA to a Roth IRA is completed within 60 days, no tax is due.
1. TRUE
Under the Pension Model, before-tax dollars are invested and investment earnings are not taxed until withdrawn.
2. FALSE
This describes the Pension Model. In the Deferred Model, only taxes on investment earnings are deferred.
3. TRUE
In both employer-sponsored qualified retirement plans (other than the Roth 401(k) and non-deductible IRAs), before-tax dollars are invested and investment earnings compound without taxation. At withdrawal, the full distribution is taxed.
4. TRUE
After-tax contributions are made to both IRAs, but the earnings on the Roth IRA will be exempt, whereas the earnings on the nondeductible traditional IRA are just deferred.
5. FALSE
Tax is paid upon the rollover from a traditional to Roth IRA. This conversion provides the privilege of future tax-free earnings on the Roth IRA.
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Fill in the blank(s) with the appropriate word(s).
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When a firm has fixed operating costs, operating leverage is present. In that case, an increase in sales results in a more-than-proportional increase in EBIT, and a decrease in sales results in a more-than-proportional decrease in EBIT
Indicate whether the statement is true or false
Shareholders have residual authority over increases in the amount of authorized capital stock
Indicate whether the statement is true or false