SIE Exam Question 281: Answer and Explanation

Question: 281

What is the tax status of Keogh plans?

• A. Non tax-deductible contributions and tax-free distributions
• B. Non tax-deductible contributions and fully taxable distributions
• C. Tax-deductible contributions and tax-free distributions
• D. Tax-deductible contributions and fully taxable distributions

Correct Answer: D

Explanation:

D: HR-10 plans, also known as Keogh (pronounced key-o) plans, are retirement accounts created for smaller professional practices (like a dentist's office or law firm). Contributions to these plans are tax deductible, while distributions are fully taxable.