5th Set Flashcards
(37 cards)
3 different forms dividends can be paid in
Cash, stock, or property
T/F: Bonds issued by US territories (i.e Virgin Islands) are triple tax exempt
True
T/F: For an investor, one of the major advantages of munis is that they are typically exempt from federal income tax.
True
No federal INCOME tax
Are C corps double taxed?
Yes
C corps are double taxed
If dividends from ADRs are paid in USD, who the investors still have currency risk
Even though paid in USD, dividends are still declared in foreign currency
Can REITs trade OTC?
Yes, and on normal exchanges too
75% of assets in a REIT must be invested in either income producing real estate or _____
Mortgages
In order for a REIT to avoid taxation as a trust, it must distribute __% of it’s net operating income
90%
T/F: Employers can contribute to a SEP IRA
True
Employers, not employees, make contributions to SEP IRAs, and the decision about whether and how much to contribute each year can vary.
T/F: The statutory prospectus is the final prospectus
True
Final prospectus
Give an example of a closed end fund
A muni bond fund
T/F: Ginnie Mae, Freddie Mac, and Fannie Mae all issue mortgage backed securities
True
They issue MBS
(Sallie Mae does not, it’s for student loans)
T/F: Sallie Mae issues mortgage backed securities
False
Sallie Mae is for student loans, etc.
What does Beta measure
Volatility of the security compared to market as a whole
Market has beta of 1.0
Is Sallie Mae backed by taxing power of the US government?
No
Sallie Mae is student loans
T/F: Freddie Mac is publicly traded and issues pass through securities
True
Freddie Mac buys mortgages
Customer statements must be sent at least once every ____
3 months, quarterly
If account has penny stocks then monthly
T/F: all reinvestments of mutual fund dividends (and capital gains distributions) are at the NAV with no sales charge.
True
Don’t pay sales charge when reinvesting
If an uncle opens a Coverdell ESA for his niece and she takes a distribution for $10k even thigh she only has $9k of qualified education expenses, who pays the taxes on the excess $1k?
The niece
Any excess distribution representing earnings that is not used to meet qualified education expenses is taxable to the beneficiary who took the distribution.
T/F: Partnerships, limited or general, and S corporations do not pay income tax. Any income earned by the business flows through to the owners.
True
No income tax for LP, GP, or s corp
Taxes on payments received from a 403b (tax sheltered annuity) plan
100% taxable
Both earnings and principal
When tax-sheltered annuity funds are withdrawn, they are fully taxed at ordinary income rates. Funds were contributed pretax and earnings accumulate tax deferred.
For a closed end investment company, is there a prospectus required after the IPO?
No
Unlike open end investment companies which require a prospectus
What kind of shares can an open end investment company issue
Only common shares
Closed end can issue common, preferred and debt instruments
What kind of securities can a closed end investment company issue?
Common shares, preferred shares, and debt instruments
Open-end companies can only issue common shares
