Question

In some cases, a taxpayer may deduct an otherwise allowable contribution to an IRA, even though the contribution is made after the close of the tax year.

a. True
b. False

Answer 1

It is true that contributions to a traditional IRA can be made after the tax year ends but can still be deducted for the previous year's income, as long as they are made by the tax filing deadline.

Step-by-step explanation:

The statement is true. Taxpayers are in fact allowed to make contributions to an Individual Retirement Account (IRA) after the end of the tax year, but still deduct them. This reflects an aspect of tax planning which takes into consideration that contributions to a traditional IRA can be made up until the tax filing deadline (usually April 15th of the following year) and still be claimed as a deduction for the prior year. Thus, if a contribution is made by this deadline, it can reduce the taxable income and potentially the tax liability for the previous year.