This week’s study question from the Solomon Online Exam Simulator question database is now available.
A client wants to open a custodial IRA account for his minor daughter who has earned a couple thousand dollars babysitting. Which of the following would be the best choice?
A. Traditional IRA
B. Roth IRA
C. SIMPLE IRA
D. SEP IRA
Correct Answer: B. Roth IRA
Rationale: SEP and Simple IRAs are for small businesses. A traditional IRA would work but since the client’s daughter doesn’t have enough income to take advantage of the tax deduction benefit from a traditional IRA, the Roth IRA is the best choice since it will permit her to eventually withdraw tax-free.
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