Which of the Following Best Describes Distributions from a Traditional

question 109

Multiple Choice

Which of the following best describes distributions from a traditional defined contribution plan?

• A)Distributions from defined contribution plans are fully taxable to the recipient as ordinary income.
• B)Distributions from defined contribution plans are partially taxable to the recipient as ordinary income and partially nontaxable as a return of capital.
• C)Distributions from defined contribution plans are fully taxable to the recipient as long-term capital gains.
• D)Distributions from defined contribution plans are partially taxable to the recipient as capital gains and partially nontaxable as a return of capital.

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Definitions:

Consolidation Worksheet

A tool used in accounting to prepare the financial statements of a parent company and its subsidiaries, merging their assets, liabilities, and other financial items into a single set of statements.

Fair Value

The financial return from selling an asset or expense for transferring a liability in a regulated exchange with market entities on the date of appraisal.

Goodwill

An asset lacking physical substance that comes into existence when a firm is bought for an amount that surpasses the fair value of its recognizable net assets.

Cash-Flow Contingency

A provision or reserve for potential changes in cash flow due to uncertain future events that might affect a company's financial health.