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Finra Exam Series-6 Topic 4 Question 48 Discussion

Actual exam question for Finra's Series-6 exam

Question #: 48
Topic #: 4

[All Series-6 Questions]

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

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Haydee

13 days 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!

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Brice

19 days 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.

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Buck

1 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.

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Jamal

1 days ago

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

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Mauricio

1 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.

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Micaela

16 days ago

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

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Hyun

23 days ago

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

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Nicolette

1 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.

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Mila

2 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.

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Roxane

2 months ago

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

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Iluminada

2 months ago

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

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