Solved: Scott and Allison are married and file a joint tax

Scott and Allison are married and file a joint tax return. Scott is a graduate student who works
part-time and earned $15,000 in 2012. He is not eligible to participate in his employer's
retirement plan because he is a part time worker. Allison is a high school teacher who earned
$50,000 in 2012 and is an active participant in the school district's retirement plan. Assume you
are a financial planner and the couple asks for your advice. Based on the preceding facts
answer each of the following questions.
a. Is Scott eligible to establish and deduct contributions to a traditional IRA? Explain your
answer.
b. Is Allison eligible to establish and deduct contributions to a traditional IRA? Explain your
answer.
c. Assume that Scott graduates and the couple's modified adjusted gross income is $130,000 in
2012. Both Scott and Allison participate in their employers' retirement plans. Can either Scott or
Allison, or both, establish a Roth IRA? Explain your answer.
d. Allison has a baby and withdraws from the labor force to raise the child. She is no longer an
active participant in the school district's retirement plan. Scott receives a promotion and
continues to participate in his employer's retirement plan. His annual salary is $110,000 in 2012.
Can Allison make a tax-deductible contribution to a traditional IRA? Explain your answer.
e. Explain to Scott and Allison the advantages of a Roth IRA over a traditional IRA.

Scott and Allison are married and file a joint tax

ANSWER
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