Fast review mode: answers are shown by default so you can skim quickly. Hide them if you want to self-test.
The Series 7 exam tests knowledge of tax implications for investments and various retirement plans (IRAs, Keoghs, 401(k)s, 529s), focusing on contribution limits, withdrawal rules, and tax treatment (pre-tax vs. Roth). Key topics include 10% penalties for early withdrawals (<59 1/2), 6% penalties for excess contributions, and suitability.
Key Tax Concepts for Series 7 Capital Gains & Losses: Taxed at favorable rates if held long-term (> 1 year), while short-term gains are taxed as ordinary income. Dividends: Generally taxed at qualified dividend rates; however, REIT dividends are taxed as ordinary income. Municipal Bonds: Interest is exempt from federal taxes, and sometimes state taxes if the holder is a resident of the issuing state.
Tax-Deferred vs. Tax-Free: Pre-tax (Traditional IRAs/401(k)s): Contributions reduce taxable income, but withdrawals are taxed as ordinary income. Roth IRAs/401(k)s: Contributions are made after-tax, but qualified withdrawals are tax-free. Cost Basis: Important for calculating gains on inherited securities (stepped-up basis) or gifts (donor's basis).
Retirement Plans Covered Individual Retirement Accounts (IRAs): Traditional (pre-tax) vs. Roth (after-tax). Contribution Limits (2026): Generally $7,500 (with catch-up for 50+). Qualified Corporate Plans (ERISA): 401(k), Profit-Sharing, Pension Plans. These are generally tax-deferred. Self-Employed Plans: Keogh (HR-10) plans and SEP-IRAs, which have higher contribution limits than IRAs. 529 College Savings Plans: After-tax contributions, tax-deferred growth, tax-free withdrawals for qualified education expenses.
Retirement Plan Rules & Penalties Early Withdrawal Penalty: 10% penalty for withdrawals before age 59 1/2, plus ordinary income tax. Exceptions to 10% Penalty: Death, disability, first-time home purchase, or qualified education expenses. Required Minimum Distributions (RMDs): Must start at a specific age (currently 73 or 75, depending on birth year) for traditional IRAs and 401(k)s, or a 50% penalty applies to the shortfall. Excess Contribution Penalty: 6% penalty on contributions exceeding IRS limits.
Study Tips Focus on suitability: Know which plan fits a client based on income, age, and goals. Understand the difference between qualified (employer-sponsored) and non-qualified plans. Do not confuse tax-deferred with tax-free.
Join 4M+ learners. Unlock unlimited quizzes, wrong-answer tracking, flashcards + reminders, study guides, and 1-on-1 challenges.