Scott and Allison are married and file a joint tax return. Scott is a graduate student who works part-time and earned $15,000 in 2012. He is not eligible to participate in his employer's retirement plan because he is a part time worker. Allison is a high school teacher who earned $50,000 in 2012 and is an active participant in the school district's retirement plan. Assume you are a financial planner and the couple asks for your advice. Based on the preceding facts answer each of the following questions.
a. Is Scott eligible to establish and deduct contributions to a traditional IRA? Explain your answer.
b. Is Allison eligible to establish and deduct contributions to a traditional IRA? Explain your answer.
c. Assume that Scott graduates and the couple's modified adjusted gross income is $130,000 in 2012. Both Scott and Allison participate in their employers' retirement plans. Can either Scott or Allison, or both, establish a Roth IRA? Explain your answer.
d. Allison has a baby and withdraws from the labor force to raise the child. She is no longer an active participant in the school district's retirement plan. Scott receives a promotion and continues to participate in his employer's retirement plan. His annual salary is $110,000 in 2012. Can Allison make a tax-deductible contribution to a traditional IRA? Explain your answer.
e. Explain to Scott and Allison the advantages of a Roth IRA over a traditional IRA.