Investment Company and Variable Contracts Products Representative (Series 6)Practice Exam

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How should IRA contributions be made?

In the form of real estate
In cash
In stocks and bonds
Through government bonds only

The correct answer is: In cash

Contributions to an Individual Retirement Account (IRA) are typically required to be made in cash or cash equivalents. The IRS stipulates that the contributions must be made in a manner that allows for the proper tracking and reporting of the funds, which is primarily facilitated through cash transactions. This ensures that the contributions can be easily verified and accounted for during the setup and operation of the IRA. While it is permissible within certain limits and conditions to invest IRA funds in various assets, such as stocks, bonds, or even real estate after the funds have been contributed, the initial contribution itself must be in cash. This cash contribution can later be used to purchase a wide array of investments within the IRA, allowing for flexibility and diversification of assets in the account. Investing contributions directly in stocks, bonds, or real estate as a form of initial payment is not allowed under the current IRS regulations, which is why the other options do not align with the correct methodology for making IRA contributions.