SIE Exam Question 517: Answer and Explanation

Question: 517

An investor has deposited $100,000 into a qualified retirement account over a 10-year period. The value of the account has grown to $175,000 and the investor plans to retire and take a lump sum withdrawal. The investor will pay:

• A. Ordinary income taxes on the $100,000 and capital gains on the $75,000.
• B. Ordinary income taxes on the whole $175,000.
• C. Ordinary income taxes on the $75,000 only.
• D. Capital gains tax on $75,000 only.

Correct Answer: B

Explanation:

B: The retirement account is qualified, which means the investor has deposited the money pretax, therefore, all of the money is taxed when it is withdrawn.