For Each of the Following IRA Situations,determine the Amount the Taxpayer

question 39

Essay

For each of the following IRA situations,determine the amount the taxpayer can deduct.Discuss any limitations,which might be placed,on the deduction.
a.Marissa is single and is an active participant in a qualified employee pension plan.Determine the maximum Roth IRA contribution that she can make if her adjusted gross income for the year is $73,000.
b.David and Donna are married and file a joint return.Each is covered by an employee-sponsored pension plan,and their adjusted gross income is $102,000.Determine their maximum IRA contribution and deduction for the current year.
c.Pedro and Roxanne are married and have two children,ages 8 and 4.Their adjusted gross income for the year is $196,000.What is maximum amount they can contribute to each child's Coverdell Education Savings Account (CESA)for the year?

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Definitions:

Expected Return

The average return an investor anticipates receiving on an investment if it is held for a specific period of time.

Risk Premium

The excess return that an investment is expected to generate above the risk-free rate, compensating investors for taking on a higher level of risk.

Arbitrage

The practice of buying an asset in one market and simultaneously selling it in another market at a higher price, thereby profiting from the temporary difference in prices.

Risk-Free Economic Profits

Refers to theoretical profits that an investor can make without taking any market risk, which in reality is very hard to achieve due to market efficiencies.