April, who is under age 50, is considering investing in tax-free state government bonds or making a permitted tax-deductible contribution to a traditional IRA. Assume that the amounts are the same for either alternative and that she can reinvest the interest income from the government bonds indefinitely. Select tax and nontax factors that she should consider? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer. Any boxes left with a question mark will be automatically graded as incorrect.)
1. Cash outflow on account of contribution to IRA would be less than net investment in bonds due to tax impact
2. Cash outflow on account of contribution to IRA would be more than net investment in bonds due to tax impact
3. Annual income from IRA would be subjected to state tax
4. Annual interest income from bonds would be subjected to state tax
5. Annual interest income from bonds would be subjected to federal tax
6. Withdrawal from IRA will be fully taxable both for federal and state tax purposes whereas principal amount of bonds on redemption is never
7. Principal amount of bonds on redemption will be fully taxable both for federal and state tax purposes whereas withdrawal from IRA is never
8. Bonds can be sold quickly with little or no tax consequences whereas withdrawal of money from IRA account before attaining age of 59 ½ taxable taxable years will be fully taxable and will be subject to 10% tax penalty