Finra Series-6 Exam - Topic 4 Question 48 Discussion

Actual exam question for Finra's Series-6 exam

Question #: 48
Topic #: 4

Which of the following statements regarding a Coverdell Education Savings Plan (ESA) are true?

i. There are income limitations regarding those who may contribute to an ESA

ii. There is a maximum annual aggregate amount that can be contributed to a single beneficiary's account.

iii. Contributions to an ESA are tax deductible.

IV. The monies must be used prior to the beneficiary's 30th birthday for education-related expenses in order to avoid paying both taxes and a penalty.

AI and II only

BI and III only

CI, II, and IV only

DI, II, III, and IV

Show Suggested Answer

Suggested Answer: B

The true statement is that reinvested dividends and capital gain distributions count toward reaching a breakpoint under the rights of accumulation. The rights of accumulation are not something that all mutual funds with front-end loads must offer. There is no time limit on the accumulation period. The rights of accumulation and the letter of intent are two separate animals; neither has anything to do with the other.

by Janey at Sep 19, 2022, 09:21 PM

Limited Time Offer

25%

Off

Get Premium Series-6 Questions as Interactive Web-Based Practice Test or PDF

Contribute your Thoughts:

Submit Cancel

Vince

4 months ago

Yep, max contribution limits are a thing too!

upvoted 0 times

...

Rozella

4 months ago

Wait, they have to use the money by age 30? That seems strict!

upvoted 0 times

...

Tamra

4 months ago

Actually, contributions to an ESA are not tax deductible.

upvoted 0 times

...

Deja

4 months ago

Totally agree, but I thought contributions were tax deductible?

upvoted 0 times

...

Casie

4 months ago

I know there are income limits for ESA contributions.

upvoted 0 times

...

Jamika

5 months ago

I believe the funds must be used before the beneficiary turns 30, but I’m uncertain about the penalties if they aren’t.

upvoted 0 times

...

Carlton

5 months ago

Contributions to an ESA are definitely not tax-deductible, right? That seems to be a common point in practice questions.

upvoted 0 times

...

Taryn

5 months ago

I think there is a maximum contribution limit per beneficiary, but I can't recall if it's annual or total.

upvoted 0 times

...

Cyril

5 months ago

I remember that there are income limits for contributing to an ESA, but I'm not sure about the exact figures.

upvoted 0 times

...

Hobert

5 months ago

I'm a little confused by this question. I know contact tracing is an important part of the pandemic response, but I'm not super familiar with the specific laws and regulations around it. I'll have to make an educated guess on this one.

upvoted 0 times

...

Hollis

5 months ago

I remember we discussed the importance of leadership in compliance, but is that really the key for a risk-based program?

upvoted 0 times

...

Iluminada

5 months ago

I think FSAs are set up by employers, but I can't remember if it's only them or if employees can contribute too.

upvoted 0 times

...

Haydee

9 months ago

Wait, there's a 30th birthday deadline? Guess I better start saving for my kid's college fund before they hit the big 3-0!

upvoted 0 times

Jacklyn

8 months ago

Ailene: That makes sense, there are income limitations and a maximum contribution amount.

upvoted 0 times

...

Glory

8 months ago

User 3: I think the correct options are A) I and II only.

upvoted 0 times

...

Ailene

8 months ago

User 2: I didn't know that, thanks for the heads up!

upvoted 0 times

...

Fannie

8 months ago

User 1: Yeah, there's a deadline to use the money for education expenses.

upvoted 0 times

...

Brice

9 months ago

Wow, that fourth statement really threw me off. I was about to select A, but I guess I need to read more carefully next time.

upvoted 0 times

Whitney

8 months ago

User 3: It's important to pay attention to all the details in these types of questions.

upvoted 0 times

...

Xochitl

8 months ago

User 2: I agree, I almost selected the wrong answer too.

upvoted 0 times

...

Kiley

9 months ago

User 1: I know, that fourth statement is tricky.

upvoted 0 times

...

Buck

10 months ago

Hah, good thing I read the fine print! I almost went with B, but the tax deduction part is a myth. C is the way to go.

upvoted 0 times

Kyoko

9 months ago

I'm glad we both caught that detail. C it is!

upvoted 0 times

...

Janessa

9 months ago

Yeah, I made the same mistake. C is definitely the correct choice.

upvoted 0 times

...

Jamal

9 months ago

I almost picked B too, but then I realized contributions to an ESA are not tax deductible.

upvoted 0 times

...

Mauricio

10 months ago

D seems to be the right answer. All four statements are true about a Coverdell ESA. I'm confident this is the correct choice.

upvoted 0 times

Verlene

8 months ago

I'm also leaning towards D. It seems to be the most comprehensive option with all the correct statements.

upvoted 0 times

...

Domonique

8 months ago

Yes, D is the right choice. It covers all the important aspects of a Coverdell ESA.

upvoted 0 times

...

Gladys

8 months ago

I agree, D includes all the true statements about a Coverdell ESA.

upvoted 0 times

...

Emiko

8 months ago

I think D is the correct answer. All four statements seem to be true about a Coverdell ESA.

upvoted 0 times

...

Beata

9 months ago

Absolutely, knowing the specifics can help make the most of the savings plan.

upvoted 0 times

...

Dottie

9 months ago

I believe D is the best choice. It's good to be informed about the rules and limitations.

upvoted 0 times

...

Micaela

9 months ago

Yes, I agree. It's important to know the details of the plan before contributing.

upvoted 0 times

...

Hyun

10 months ago

I think D is the correct answer. All four statements are true about a Coverdell ESA.

upvoted 0 times

...

Nicolette

10 months ago

I think the correct answer is C. The first three statements are true, but the fourth one is not. The monies can be used until the beneficiary's 30th birthday, not before.

upvoted 0 times

...

Mila

11 months ago

I'm not sure about the tax deductible part, but I think the penalty for not using the money for education expenses before the beneficiary's 30th birthday is true.

upvoted 0 times

...

Roxane

11 months ago

I agree with Iluminada, because there are income limitations and a maximum annual contribution for an ESA.

upvoted 0 times

...

Iluminada

11 months ago

I think the correct answer is C) I, II, and IV only.

upvoted 0 times

...