Bob Has Decided to Contribute $2,800 to a Roth IRA

question 205

Multiple Choice

Bob has decided to contribute $2,800 to a Roth IRA. He is currently in the 25% tax bracket. How will his contribution affect his income tax for the current year?

• A) It will reduce the amount of taxes he owes in the current tax year by $700.
• B) It will increase the amount of taxes he owes in the current year by $700.
• C) It will reduce the amount of taxes he owes in the current year by $2,100.
• D) It will have no effect on the amount of taxes he owes this year.

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Definitions:

Discreet Approach

A method of implementing changes or segments within a business or project in a separate, distinct manner, often used to monitor the success or failure of initiatives independently.

IFRS

International Financial Reporting Standards, a set of accounting standards developed by the International Accounting Standards Board (IASB) that is globally accepted for financial reporting.

Long-term Debt

Borrowings of a company not due for repayment within the next 12 months, typically in the form of loans or bonds.

Operating Segment

A component of an enterprise engaged in business activities from which it may earn revenues and incur expenses, often reported separately in financial statements.