Brett Danko CFP Flashcards

Question

Non-Durable Power of Attorney

Answer 1

Power ceases when the principal is no longer legally competent

Answer 2

Power continues when principal becomes incompetent

Answer 3

Power starts when principal becomes incompetent

Answer 4

Exercisable only with the consent of the creator of the power or a person having a substantial adverse interest

Answer 5

Special "standards" that have to be met for a trust to release funds (HEMS) Health Education Maintenance Support

Answer 6

Holder may exercise power in any manner they want (think rev trusts. No difference from outright owning the property)

Answer 7

Property subject to a general power will be included in a donee decedent's estate (or considered a taxable gift) only to the extent that the property exceeds the greater of: 1. $5,000 2. 5% of the total value of the fund subject to the power as measured at the time of lapse

Answer 8

Gift Taxation: 1. If power exercised, released, or lapsed - taxed 2. If power lapsed with a 5 or 5 power, not taxed Estate Taxation 1. If power exercised, released, or lapsed - taxed 2. If power exercised, released, or lapsed with a 5 or 5 power - greater of the 5 or 5 is taxed

Answer 9

1. If the grantor retains a right to use/enjoy trust property (beneficial enjoyment) 2. A reversionary interest exceeding 5% (retained interest)

Answer 10

1. There must be property (corpus/principal) 2. There must be a grantor 3. There must be a trustee who received legal title to the property 4. There must be a beneficiary who has equitable title to the property 5. The grantor and trustee must be legally competent

Answer 11

They are merely a conduit for forwarding income to the beneficiaries (2503(b), Marital, QTIPs)

Answer 12

They are separate tax entities that... 1. Are irrevocable and the grantor has not retained any control 2. Income is accumulated (2503(c))

Answer 13

1. An irrevocable trust with demand rights 2. Demand right is given to a minor through their guardian 3. The bene has the right to demand a withdrawal from the trust that is the lesser of the annual gift exclusion ($18k) or the amount gifted 4. Bene has 30 days from the time of gift to execute their withdrawal

Answer 14

1. Property transferred to the trust at the time of a decedent's death 2. Can be structured to provide a stream of income to surviving spouse or other individuals 3. Decedent has postmortem control 4. (Family, Bypass, Credit Shelter, Unified Credit Shelter)

Answer 15

1. Provides surviving spouse with a stream of income for life, but the decedent has postmortem control of the trust property 2. Property qualifies for a marital deduction 3. Mainly used for 2nd marriages 4. Think LAME Lifetime income for the spouse Annual payments to the spouse Mandatory payments to the spouse Exclusively for the spouse

Answer 16

1. No unlimited marital deduction 2. No estate tax due 3. Jointly held property between spouses is not considered one-half owned 4. Limited gift between spouses of only 100K (indexed) per year 5. Used for foreign spouses

Answer 17

1. UGMA/UTMA 2. 2503(c) Trust 3. Section 529 College

Answer 18

1. Charitable Remainder Annuity Trust (CRAT) - 5% 2. Charitable Remainder Unitrust (CRUT) - 5% 3. Pooled Income Fund - no 5% distribution required 4. Charitable Gift Annuity - no 5% distribution required

Answer 19

1. Charitable Lead Trust (CLAT/CLUT) - no 5% distribution required 2. Private Foundation - 5% but can give money to individuals

Answer 20

PIGS need income Private Annuity Installment Sale Grantor annuity trusts (GRAT/GRUT) Self-canceling installment note (SCIN)

Answer 21

1. A partnership/S-corp 2. A family limited partnership (FLP) 3. A gift leaseback 4. A qualified personal residence trust (QPRT)

Answer 22

1. The disclaimer must be an irrevocable refusal to accept the interest 2. Refusal must be in writing 3. Refusal must be received within nine months 4. The intended donee cannot have accepted any interest in the benefit 5. The interest will pass, without any input from the disclaimer, to someone else

Answer 23

A way to provide a closely held business owner's estate with liquidity 1. The business must be incorporated (closely held) 2. The value of the business must exceed 35% of the decedent's adjusted gross estate 3. Redemption cannot exceed the sum of the estate taxes plus administration expenses

Answer 24

A way to provide a closely held business owner's estate with liquidity 1. The Value of the business must exceed 35% of the decedent's adjusted gross estate 2. During the first 4 (of 14) years the estate can pay interest only on taxes due

Answer 25

A Section 2032A Special Use Valuation 1. 25% of the gross estate consists of real property 2. Must be in qualified use - 5 out of 8 year rule before death and 10 years after death

Answer 26

A condition where there is a possibility of loss or a situation where to an exposure to loss exists

Answer 27

The cause of a possible loss, the event insured against perils like windstorm, fire, and theft

Answer 28

A condition that may create or increase the chance of loss arising from a given peril EX: Owning a home by a river

Answer 29

1. The loss must be definite and measurable 2. Must be fortuitous or accidental 3. There must be a large number of homogeneous exposure units 4. The loss must not be catastrophic for the insurance company

Answer 30

1. Avoidance (renting property instead of owning it) 2. Diversification (having property in multiple warehouses instead of one 3. Transfer (insurance) 4. Retention (co-insurance/deductibles) 5. Reduction (safety programs)

Answer 31

You should insure risks what have a high severity and low frequency Any other risk with high frequency would be too expensive to insure

Answer 32

The policy covers WHARVES/FLT Windstorm Hail Aircraft Riot Vandalism Vehicles Explosion Smoke Fire Lightning Theft

Answer 33

Everything basic insurance covers (WHARVES/FLT) plus the RAF Rupture of a system Artificially generated electricity Falling objects Freezing of plumbing

Answer 34

It only needs to be there when the policy is purchased

Answer 35

It must be there when the policy purchased and at the time of the claim

Answer 36

1. Favors older employee/owners 2. Provides a certain retirement benefit (max $275k) Can be used to meet a certain retirement objective 3. Company must have very stable cash flow 4. Past service credits are allowed 5. Forfeitures must be applied to reduce employer contributions 6. PBGC insured

Answer 37

1. Up to 25% of employer contributions are deductible 2. Mandatory fixed contributions - business must have a stable cash flow 3. Max annual contribution of 100% of salary or $69,000

Answer 38

1. Up to 25% of employer contributions are deductible 2. Mandatory fixed contributions - business must have a stable cash flow 3. Favors older workers. 4. Benefits are not guaranteed. They are based on the employee's balance at retirement (can be higher/lower) 5. Follows section 415 contribution limit

Answer 39

1. Up to 25% of employer contributions are deductible 2. Flexible contributions must be "recurring and substantial". It is okay to not contribute anything for a year or two 3. Follows section 415 contribution limit 4. Can have 401k & SIMPLE provisions (SIMPLE 401k is exempt from creditors

Answer 40

1. Qualified profit sharing or stock bonus plan that allows plan participants to defer salary into the plan 2. Max deferral is $23,000 3. Max contribution is $30,500 (deferral plus catch up if age 50 and over)

Answer 41

Includes employer contributions, employee salary reductions, and plan forfeitures. It is the lesser of... 1. 100% of compensation 2. $69,000

Answer 42

A safe harbor 401k plan automatically satisfies the nondiscrimination tests involving highly compensated employees (HCEs) with either an employer matching contribution or a nonelective contribution

Answer 43

Employer contributions must be immediately vested If employer chooses nonelective deferral method they must contribute 3% of employee's comp no matter what If employer chooses match, they must contribute 100% of the first 3% and then 50% on the next 2% deferred

Answer 44

1. Up to 25% of employee comp is deductible 2. Flexible contributions 3. Follows section 415 contribution limit 4. 100% of contribution can be invested in company stock 5. ESOP cannot be integrated with social security or cross tested

Answer 45

The basis of stock in an ESOP is taxable as ordinary income The NUA, which is the difference between the basis and market value of stock at the time of distribution, is always an LTCG Anything above the NUA is taxed as a capital gain depending on how long it is held (short/long)

Answer 46

This plan is only for sole proprietorships and partnerships only. To find the max contribution, 1. If a 15% contribution plan, multiply business profit X 12.12% 2. If a 25% contribution plan, multiply business profit X 18.59%

Answer 47

1. Company must have fewer than 100 employees 2. Employer cannot maintain any other plan 3. Participants are always fully vested 4. It is easy to administer and funded by employee salary reductions and an employee match 5. Has a $16,000 max deferral and a $3,500 catch up contribution

Answer 48

1. Can only make employer contributions which are not required 2. If self employed, contributions are the same as Keogh plans 3. Max contribution is the lesser of 25% of salary or $69,000 4. Always immediately vested 5. Can be integrated with social security 6. To be eligible employees must be 21 years or older, paid at least $750, and have worked 3 out of the past 5 years

Answer 49

1. No loans from the IRA are allowed 2. No life insurance can be put in one 3. Always immediately vested 4. May not be creditor protected (state specific) 5. Must be 59 1/2 (not 55) for no 10% penalty 6. Must take RMDs at 73 (even if not an owner)

Answer 50

1. Only 501(c)(3) organizations and public schools can establish them 2. Subject to ERISA only if employer contributes 3. Follows section 415 contribution limits

Answer 51

1. The max age and service requirements are age 21 and 1 year of service (21 and 1 rule) 2. Could require two years of service but the employee must be immediately vested 3. A year of service is 1,000 hours or 500 hours while being with the company for 3 years

Answer 52

1. A greater than 5% owner (or the child, grandchild, parent, and spouse of one) 2. Any employee earning in excess of $155,000 in the preceding year 3. Used for discrimination testing

Answer 53

1. A greater than 5% owner (or the child, grandchild, parent, and spouse of one) 2. An officer who makes more than $220,000 3. A greater than 1% ownership who makes more than $155,000 a year 4. Used to look at vesting

Answer 54

1. A 3-year cliff vesting schedule 2. a 2-6 year graded vesting schedule 3. 100% vested with a 2-year eligibility

Answer 55

1. A 5-year cliff 2. A 3-7 year graded vesting schedule 3.100% vested with a 2-year eligibility

Answer 56

The minimum employer contribution must be at least 3% (C is the 3rd letter in the alphabet)

Answer 57

The minimum benefit must be at least 2% of compensation (B is the 2nd letter in the alphabet)

Answer 58

1. Transfers from a non-governmental 457 plan to a different plan. They must go into another 457 2. Hardship distributions cannot be rolled into any other plan 3. RMDs cannot be rolled over

Answer 59

Life insurance benefits must be merely "incidental" to the primary purpose of the plan which means either... 1. The premiums paid for a participants death benefit must be less than the following percentages of the plan cost for that participant Ordinary Life Insurance - 50% Term Insurance - 25% Universal Life - 25% 2. The participant's death benefit must be no more than 100 times their expected monthly benefit

Answer 60

1. Death 2. Disability 3. Equal periodic payments following separation from service 4. Distributions following separation from service at age 55 5. Distributions in accordance with a QDRO 6. Medical expenses in excess of 7.5% of AGI or health insurance costs while unemployed 7. Distributions used to pay insurance premiums after separation of employment (must file for unemployment) 8. $5,000 withdrawal for birth/adoption for a child 9. A federal declared disaster (limited)

Answer 61

1. April 1st of the year following the year when the individual attained age 73 2. December 31st of each year thereafter

Answer 62

1. April 1st of the year following the year when the individual attained age 73 or retired 2. December 31st of each year thereafter 3. Biggest point is that no RMDs are required if the employee is still working

Answer 63

1. April 1st of the year following the year when the individual attained age 73 2. December 31st of each year thereafter

Answer 64

1. If neither spouse is an active participant in an employee plan (not 457 plans), the IRA contribution is deductible 2. If one spouse is an active participant, the other spouse's IRA contribution is deductible if AGE is less than $230,000 - $240,000 3. If both spouses are active, AGI limits apply - $77,000 - $87,000 (single) and $123,000 - $143,000 (married)

Answer 65

1. Death 2. Disability 3. Substantially equal payments 4. 1st home expenses up to $10,000 5. Qualified education expenses 6. Medical expenses in excess of 7.5% of AGI or health insurance costs while unemployed 7. Distributions used to pay insurance premiums after separation of employment (must have received unemployment for 12 weeks) 8. $5,000 withdrawal for birth/adoption for a child 9. A federal declared disaster (limited)

Answer 66

1. Any contributions (not conversions) are withdrawn first 2. Conversions are withdrawn second 3. Earnings are withdrawn last

Answer 67

1. It must be distributed within 5 years of the owner's death 2. It muse be distributed over 10 years (stretch eliminated) 3. If spouse is beneficiary, they can roll the Roth into their own or take distributions until the decedent would have turned 73

Answer 68

It uses some portion of the employee's current compensation to fund the plan benefit

Answer 69

It uses employer contributions to fund the plan benefit

Answer 70

1. Assets in a rabbi trust are available for company's creditors only if the company declares bankruptcy 2. Used when fear that ownership/management may change before comp is paid out 3. Irrevocable trust. Only creditors if bankruptcy can access the funds 4. Think of mergers, acquisitions, or a change of ownership when considering a rabbi trust

Answer 71

Think EGG (1 E for 1 year from exercise date. 2 G's for 2 years from grant date) 1. 1 year from exercise date 2. 2 years from grant before selling 3. Violating either causes a disqualifying disposition and turns it into an NSO

Answer 72

At exercise, the difference between basis and market value is ordinary income. Any excess above the the market value at exercise is a capital gain

Answer 73

If EGG before sale, anything above the basis is an LTCG. Note that at exercise the bargain element (difference between market value and basis) is an add back item

Answer 74

1. They are NQDCs for governmental agencies and non-church tax exempt organizations 2. Deferral limited to section 415 limits 3. Only governmental plans allow for a catch up contribution 4. Salary deferrals are not aggregated with other plans 5. Non-governmental plans can only be rolled into other 457s

Answer 75

Base % + Permitted Disparity = Excess % Base % - the DC plan contribution for compensation below the integration level Permitted Disparity - the lesser of the base % or 5.7% Excess % - The DC plan contribution for compensation above the integration level

Answer 76

Base % + Permitted Disparity = Excess % Base % - the DB plan contribution for compensation below the integration level Permitted Disparity - the lesser of the base % or 26.25% Excess % - The DB plan contribution for compensation above the integration level

Answer 77

They are always aggregated to the section 415/SIMPLE contribution limits

Answer 78

1. If the employers are related entities, the additions are aggregated and cannot be more than the section 415 limit 2. If the employers are separate, the additions can be $69,000 to each plan (deferral limits still apply, but one employer could put in $35k and the other $45k)

Answer 79

Parent-Subsidiary: One entity that owns at least 80% of another entity Brother-Sister: Five (or fewer) owners of two or more entities own at least 80% of each entity Affiliated Service Group: A service organization and a professional organization

Answer 80

Remember DICE Declarations Page - Factual statements that identify the specific person, property, or activity being insured Definitions - Explanation of key policy terms Insuring Agreements - Spells out the basic promise of the insurance company Conditions - Spells out in detail the duties and rights of both parties Exclusions - Circumstances when the insurer will not pay

Answer 81

As long term capital gains

Answer 82

A.M. Best - A++ to F S&P - AAA to CCC

Answer 83

Remember ABCD A - Dwelling and attached structures B - Structures separated from dwelling (fences, shed) C - Contents and personal property D - Loss of use

Answer 84

Remember EF E - Liability F - Medical payments

Answer 85

1. Animals, birds, fish 2. Motorized land vehicles and aircraft 3. Property of roomers, boarders, and other tenants 4. Property contained in an apartment regularly rented or held for rental to others by the insured (unless specifically covered)

Answer 86

1. Breakage of glass 2. Loss caused by... -Falling Objects -Fire -Theft -Explosion -Earthquake -Windstorm -Hail -Water -Flood -Riot or civil commotion -Contact with birds or animals

Answer 87

1. Provides liability coverage (BI/PD) for catastrophic legal claims 2. Requires policy owner to carry certain underlying coverage of specified minimum amounts 3. Professional acts are specifically excluded 4. Nearly always a right answer since it is smart coverage

Answer 88

It is for bodily injury/physical claims (doctors, dentists)

Answer 89

It is for monetary damages (financial advisors, lawyers, etc.)

Answer 90

1. Unlimited medical expenses 2. Disability income (benefits are tax free) 3. Death benefits 4. Rehabilitation (medical and vocational) 5. Absolute liability

Answer 91

1. Routine foot care, glasses, hearing aids, dental work 2. Emergency care outside the U.S. (some exceptions for Canada, Mexico, and the Caribbean)

Answer 92

When the individual transactions are ignored and the ultimate transaction is taxed instead

Answer 93

Internal Revenue Code - Primary source of all tax law Treasury Regulations - Great authority, but not law Revenue Rulings and Revenue Procedures - Administrative interpretation/may be cited Congressional Committee Reports - Indicate the intent of congress/may not be cited Private Letter Rulings - Apply to a specific taxpayer Judicial Sources - Court decisions interpreted

Answer 94

The basis is made up of... 1. Cash invested 2. Direct loans made to the partnership 3. Loans made to the partnership, not the partner NOTE: S Corp basis does NOT include bank loans even if the S Corp owner personally guarantees the debt

Answer 95

Remember CORN (and CAT for 5-year property) Computers, Autos, and Trucks - 5 year (1245 property) Office equipment except computers - 7 year(1245 property) Residential rental property - 27.5 year(1250 property) Non-residential real property - 39 year(1250 property)

Answer 96

1. No boot received means recognized gain is zero 2. When boot is received it is the recognized gain of the exchange 3. New basis is basis from previous property plus the boot paid

Answer 97

Large: Market value exceeds $10 billion Mid: Market value is between $2 - $10 billion Small: Market value is less than $2 billion Micro: Market value is less than $300 million

Answer 98

1. A foreign stock held by US banks 2. Prices are quoted in US dollars 3. Dividends are paid in US dollars 4. Dividends are declared in foreign currency

Answer 99

The Strong Form - All information is reflected. Nothing can outperform the market The Semi-Strong Form - All publicly known information is reflected. Nothing can outperform the market except inside information The Weak Form - Historical price data is already reflected. Fundamental analysis may produce superior results

Answer 100

1. Provider paid monthly fee regardless of services rendered (capitation) 2. Out-of-network care not covered at all

Answer 101

1. Provider paid for actual services rendered 2. Out-of-network partially covered (usually 70%)

Answer 102

1. Market timing 2. Tactical asset allocation 3. Technical analysis

Answer 103

1. ST capital gains and losses are netted. LT capital gains and losses are netted 2. If a gain and a loss remain, they are again netted 3. If a loss remains only $3,000 can be used to offset ordinary income

Answer 104

1. Sale of a personal residence 2. If lived in home for 2 out of last 5 years $250k/$500k (Single/Joint) gain is tax free 3. Exception to 2 year rule is if taxpayer moves for work/health. They would receive a prorated benefit based on how long they lived there

Answer 105

1. Defined benefit plans 2. Cash balance plans 3. Money purchase plans 4. Target benefit plans 5. Profit sharing plans 6. Profit sharing 401ks 7. Stock bonus plans

Answer 106

They cannot be integrated with social security or cross tested

Answer 107

The investor buys a put and call with the same strike and expiration

Answer 108

The investor sells a call (out of the money) and buys a put at a lower strike price. They do own the stock

Answer 109

When an investor owns stock and buys a put as insurance incase the underlying declines (good answer for the exam)

Answer 110

1. Warrants are issued by corporations while calls are created by individuals 2. Warrants typically have maturities of several years 3. Warrant terms are not standardized, call options are standardized

Answer 111

They would need a short hedge, in case the underlying's price declines, and would sell a contract

Answer 112

They would need a long hedge, in case the underlying's price rises, and would buy a contract

Answer 113

1. Unexpected inflation 2. Unexpected changes in industrial production 3. Unanticipated shifts in risk premium 4. Unanticipated changes in structure of yields Remember YIIR Yields Inflation Industrial Production Risk Premium

Answer 114

1. Having a net worth of $1,000,000 2. Being an individual with an annual income over $200,000 3. Being a couple with a joint income over $300,000 4. Offerings can be sold to an unlimited number of accredited investors

Answer 115

1. Offering can only be sold to a max of 35 investors 2. Must use a purchaser representative if individual is not sophisticated

Answer 116

1. SEP 2. SAR-SEP 3. Thrift or savings plan 4. 403(b)

Answer 117

An index of volatility used in a diversified portfolio and is a measure of systematic risk

Answer 118

STD measures variability of returns used in a non-diversified portfolio and is a measure of total risk

Answer 119

Geometric evaluates the performance of the PM while IRR compares absolute dollar amounts

Answer 120

The real rate of return is the nominal return adjusted for inflation

Answer 121

The HPR is the total return (Income + Price Appreciation + Dividends - Margin Interest) over the entire period divided by the cost of the investment

Answer 122

1. Years to maturity and Duration is positively related 2. Duration and coupon rate is inversely related 3. YTM and current yield are inversely related with duration (remember coupon & yield are INterest rates and therefore INversely related)

Answer 123

1. Duration is equal to their maturities 2. There is no coupon interest, but they still produce phantom income 3. No reinvestment rate risk 4. Sold at deep discounts to par 5. Fluctuate more than coupon bonds with same maturities

Answer 124

1. If rates are expected to rise, shorten duration (UPS - Interest rates UP, Shorten duration). Buy high coupon bonds with short maturities 2. If rates are expected to fall, lengthen duration (FALLEN - Rates are FALling, LENgthen duration). Buy low coupon bonds with long maturities

Answer 125

The smaller the coupon, the greater the price fluctuation (longer duration) Think of how zero coupon bonds are the most sensitive

Answer 126

The longer the term to maturity, the greater the price fluctuation (longer duration)

Answer 127

The lower the market interest rate, the greater the price fluctuation

Answer 128

1. The degree to which duration changes as YTM changes 2. Largest for low coupon bonds, long-maturity bonds, and low-YTM bonds (Longer duration for all) 3. Allows investors to improve the duration approximation for bond price changes

Answer 129

ROE = EPS/Book Value

Answer 130

The dividend payout ratio = Common Dividends Paid/EPS

Answer 131

20% of the portion of underpayment attributed to negligence

Answer 132

75% of the portion of the tax underpayment attributable to fraud

Answer 133

5% of the tax due per month, with a max penalty of 25%

Answer 134

.5% per month the tax is unpaid up to a maximum of 25%

Answer 135

To avoid, pay the lesser of... 1. 90% of the current year's liability 2. 100% of the prior year's tax liability (or 110% if last year's AGI exceeded $150,000

Answer 136

1. Real estate taxes 2. State & local taxes 3. Personal property taxes 4. Medical, dental, and LTC (7.5% of AGI) 5. Casualty & theft losses 6. Investment interest expense 7. Home mortgage interest 8. Charitable gifts

Answer 137

1. Make sure it is a federally declared disaster 2. Use the lesser of basis or FMV 3. Subtract any insurance coverage 4. Subtract $100 (floor) 5. Subtract 10% of AGI

Answer 138

The minimum price that the option will command It is the difference between the market price and exercise price

Answer 139

It is the price at which the stock can be purchased or sold on exercise of the option

Answer 140

It is the market price of an option As the option approaches expiration, the premium approaches intrinsic value

Answer 141

It is the amount that the market price exceeds its intrinsic value IV + TV = Premium

Answer 142

1. There can only be up to 100 shareholders 2. The corporation can only have a single class of outstanding common stock (no preferred allowed), but the common stock can be voting or non-voting 3. Must be a domestic corporation 4. Only individuals, estates, and certain trusts can be shareholders 5. Nonresident aliens (people who are neither citizens nor permanent residents of the US) cannot be shareholders

Answer 143

Multiple self-employment income by .1413 Note: Self-employment income will never exceed $168,000 (SS tax stops at $168,000)

Answer 144

1. Net schedule C income 2. General partnership income (K-1 Income) 3. Board of directors fees 4. Part-time earnings (1099)

Answer 145

Wages or K-1 distributions from an S Corp

Answer 146

You subtract top of the line deductions from gross income. The main deductions are... 1. IRA Contributions 2. Self-employment tax (half of it) 3. Self-employment health insurance (100%) 4. Keogh or SEP 5. Alimony paid (pre-2019 divorce)

Answer 147

1. ISO bargain element 2. Property and income taxes

Answer 148

1. Purchase public purpose muni bonds instead of private purpose bonds 2. Defer the exercise of an ISO (preference item) to a later date 3. Disqualify an ISO so that it becomes an NSO (subject to ordinary tax) 4. Accelerate receipt of taxable income or defer payment of any itemized deductions (such as charitable giving) to increase your taxable income

Answer 149

1. The standard deduction is not allowed

Answer 150

1. If a historic rehabilitation program is held as a PASSIVE activity it can generate a deduction-equivalent tax credit of up to $25k 2. The benefit phases out between $200k and $250k AGI 3. The credit works by multiplying your max marginal bracket and multiplying it by $25k to get the credit amount

Answer 151

1. If a low-income housing program is held as a PASSIVE activity it can generate a deduction-equivalent tax credit of up to $25k 2. The credit is allowed annually over a ten-year "credit period". The depreciation is straight-line over 27.5 years 3. You would multiply your max marginal bracket by $25k to get the credit amount 4. Because there is no phaseout, it produces a higher credit

Answer 152

Insurance - Lapse of a policy loan, Section 162 life/disability Investments - Zero/Strip income, TIPS, declared but not paid Tax - K-1 income from an LP/FLP, recapture Retirement - NUA, 20% withholding on plan distributions, secular trust

Answer 153

1. Calculate the max deductible amount - 60% of AGI 2. Calculate the eligible amounts given to 50% organizations (public charities) like churches, schools, hospitals, ETC. 3. Calculate the eligible amounts given to 30% organizations (private charities) such as war veteran groups, fraternal orders, and private non-operating foundations

Answer 154

All net UNEARNED income of a child who has not turned 18, or turns 19-23 while being a full-time student, is taxed at their parent's tax rate 1. The first $1,300 is tax free ($1,300 standard deduction) 2. The second $1,300 is taxed at 10% 3. Anything above that is taxed at their parents marginal tax rate

Answer 155

Mandatory where the taxpayer's records reflect only cash transactions and there are no inventories Always use for smaller businesses

Answer 156

Mandatory for purchases or sales where there are inventories

Answer 157

Combines accrual for inventory portion of a business and cash for cash portion of a business

Answer 158

It is for long term contracts where the contract will not be completed within the taxable year started

Answer 159

The square of the correlation coefficient. It describes how funds move relative to other funds A high R-squared indicate a diversified fund while a low R-squared indicates a non-diversified fund

Answer 160

April 15th, June 15th, September 15th, and January 15th

Answer 161

A transaction that lacks business purposes. Economic substance will be ignored for tax purposes Example: A sale from XYZ to ABC, but both companies are owned by the same person

Answer 162

The substance of a transaction and not merely its form governs its tax consequences Example: The president of XYZ has the company loan him the money he needs. He never intends to repay the loan or take a salary

Answer 163

Income is taxed to the tree that grows the fruit even though it may be assigned to another prior receipt Example: Mr. T owns XYZ, an S Corp. He directs all income be paid to his son so that he reports no income

Answer 164

1. Earned income credit (refundable) 2. Foreign tax credit 3. Elderly and disabled credit 4. Adoption credit 5. Child tax credit ( up to $1,700/child and could be refundable) 6. Credit for child & dependent care expenses

Answer 165

1. If the contract lapses without exercise the premium is a short-term gain 2. If the contract is exercised the premium paid is added to the sale price as an STCG. (if covered call and underlying is held longer than a year, can be an LTCG)

Answer 166

1. If purchased and not exercised, premium paid is a STCL

Answer 167

Almost all workers are covered except... 1. Federal employees continuously employed since before 1984 2. Some Americans working abroad 3. Student nurses & students working for a college/college club 4. Railroad employees 5. A child, under age 18, who is employed by a parent in an UNINCORPORATED business 6. Ministers, members of religious orders, and Christian Science practitioners if they claim an exemption 7. Members of tribal councils

Answer 168

If income (MAGI) plus 1/2 of social security benefits (and any muni bond income) is... 1. Above $25k Single ($34k MFJ), 50% of social security is included in income 2. Above $34k single ($44k MFJ), then 85% of social security is included in income

Answer 169

Remember IPOD Intangible excess drilling costs Private-activity muni bonds Oil & gas percentage depletion Depreciation (ACRS/MACRS) - but not straight line

Answer 170

1245 property and tangible personal property

Answer 171

1250 property, real estate, and intangible assets (such as owning a franchise)

Answer 172

Uses annuitization to provide needed income but leaves no money at the end of a planned for period

Answer 173

Uses interest only, so the original capital is still left at the end of the income period (Also called capital retention - think perpetuities)

Answer 174

100% of the cash gift up to 60% of AGI is deductible

Answer 175

Using FMV, up to 30% of AGI is deductible

Answer 176

Using basis, up to 50% of AGI is deductible

Answer 177

FIFO means that the first shares bought are the first shares sold

Answer 178

It allows an investor to divide the total cost of all shares held by the number of shares held

Answer 179

It allows the seller to specify certain lots that are sold to create gain, neutralize gain, or create a loss (most flexible)

Answer 180

tax exempt yield / (1 - marginal tax rate)

Answer 181

Tax equivalent yield x (1 - marginal tax rate)

Answer 182

You should look for the highest Sharpe ratio if R-squared is less than 60% (the portfolio is not diversified)

Answer 183

You should look for the highest Alpha if R-squared is greater than 60% (the portfolio is diversified) If no Alpha, look for the highest Treynor ratio

Answer 184

They must... 1. Look back and recapture the lesser of cost recovery deduction (CRD) or gain realized as 1245 gain (ordinary income) 2. Recover any excess gain as 1231 gain (capital gain)

Answer 185

((1-initial margin price) / (1-maintenance margin price)) x stock's purchase price Shortcut: If minimum maintenance is 25% margin call is at 2/3 of purchase price If minimum maintenance is 30%, take 2/3 of purchase price and find the next highest number

Answer 186

From age 62 to FRS, benefits are reduced by $1 for every $2 earned over $22,320

Answer 187

Improved land is normally income producing. Income properties include residential rental, commercial, and industrial properties. The intrinsic value of a real estate property can be computed using an NOI computation Gross rental receipts +Nonrental income (laundry machines, etc.) =Potential Gross Income (PGI) - Vacancy and collection losses - Operating expenses (excluding interest and depreciation) = Net Operating Income (NOI)

Answer 188

1. 100% of the first 20 days of skilled care is covered. Then everything over a specific amount is covered for the next 80 days. After 100 days nothing is covered 2. Only pays for skilled care, admission to a nursing home must follow within 30 days of a hospital stay (3 days or more), and the patient's condition must be expected to improve

Answer 189

MEC distributions are LIFO and treated as taxable income

Answer 190

When the client has borrowed substantially against their whole life policy and is concerned about their reduced death benefit

Answer 191

The belief that when something goes right, it is because you were smart and made the right decision. If it does not work out, it is someone else's fault or simply bad luck

Answer 192

1. It is used in conjunction with a high deductible health plan 2. Distributions tax-free if used for health care 3. Contributions not spent are carried forward in the owner's name and are portable 4. Unused assets become property of named beneficiary upon death 5. Distributions for non-medical are ordinary income taxable plus 20% penalty if under 65

Answer 193

It is a continuous term policy guaranteeing the insured's right to maintain the policy at the stated premium

Answer 194

Continuous right to maintain the policy, but the insurer may increase the premium by class of insureds

Answer 195

1. Earth movements (earthquakes) 2. Flood 3. Neglect 4. Intentional Loss 5. Ordinance/Law 6. Power failure 7. War 8. Nuclear Hazard 9. Sinkhole is a covered peril for the exam

Answer 196

The 20/20 vision we have when looking at a past event and thinking we understand it, when in reality we may not

Answer 197

If amount of insurance is less than 80% of replacement cost insurance will pay the greater of... 1. ACV less any depreciation 2. The (insurance carried / (replacement cost x coinsurance %)) x loss - deductible If amount of insurance is greater than 80% of replacement cost insurance will pay 100% of claim

Answer 198

1. The vehicle must be owned by an individual/couple living in the same household 2. It must be a private passenger automobile 3. It must not be rented to others 4. It must not be used as a public or livery conveyance

Answer 199

Liability for the other driver if they are uninsured

Answer 200

Solely by the employer

Answer 201

Someone who specializes in legal & care issues for the elderly

Answer 202

1. Life to life 2. Life to annuity 3. Annuity to annuity

Answer 203

Yes, but it is limited to a $50,000 loan on each policy

Answer 204

It is normally cheaper

Answer 205

No as long as they are occasional

Answer 206

Anything similar to insurance/care benefits, but they cannot provide anything similar to a pension or annuity

Answer 207

They are not because they are funded by the employee

Answer 208

1. A sale or transfer to the insured 2. A sale or transfer to a partner or a partnership in which the insured is a partner 3. A sale or transfer to a corporation in which the insured is a shareholder or officer 4. A transfer of property incident to a divorce

Answer 209

You divide the basis by the total payout (monthly payment x 12 x amount of years) to get the tax free portion of the monthly benefit The other half is taxable

Answer 210

Part A - Limited to third parties (BI/Liability) Part B - Medical Payments Part C - Uninsured/underinsured motorists Part D - Damage to the covered auto

Answer 211

1. Any vehicle shown on the declarations page 2. Any of the following vehicles which you acquire during the policy period 3. Any trailer you own listed on the declarations page 4. Any auto or trailer you do not own while used as a temporary substitute for any covered vehicle which is out of normal use (EX rental while it is in the shop) 5. There is no coverage for pickups, panel trucks, or vans used in a business

Answer 212

1. The named insured and any family member who suffers bodily injury caused by accident while occupying the covered auto 2. The named insured and family members who if, while a pedestrian, are struck by any motor vehicle designed for use on public roads, or by a trailer 3. Other persons while occupant of the insured's auto (passengers)

Answer 213

They are taxed as LIFO They are taxable as ordinary income plus a 10% penalty under age 59.5

Answer 214

1. Must be used by March 15th or forfeited to company (use it or lose it - medical only). Dependent care must be used by 12/31 2. Not subject to income tax, FICA, FUTA 3. Health FSA may not be used to reimburse an employee premiums paid for other health plans (such as an MSA, HSA, and LTC) 4. Expenses for LTC services cannot be reimbursed under a health FSA, but other medical expenses can be reimbursed

Answer 215

1. Health care premiums 2. Insurance premiums on non-discriminatory group life policies up to $50k 3. A company car for working conditions only 4. Employer-provided transit passes ($315/ month cap) or parking ($315/ month cap) 5. Occasional overtime meal money, cab fare, theater or sporting event tickets 6. Discounts on services limited to 20% of selling price charged to customers

Answer 216

Any health insurance premiums paid for self-employed, partners, and more than 2% owners of S-corps are taxable income. 100% is deductible as an adjustment to to income on the front of the 1040. This can include all types of health insurance programs

Answer 217

1. Low risk tolerance 2. Insurance company controls investment return 3. Assets part of general account

Answer 218

1. High risk tolerance 2. Client controls investment return 3. Assets part of a separate account

Answer 219

Remember CRAPO Cash Reduce premium Accumulate with interest Paid-up additions One-year term/5th dividend

Answer 220

Cash Extended term Paid up reduced amount

Answer 221

Cash Pure life/single life (highest payout) Refund - return on premium Period certain Specified income/period Interest only

Answer 222

1. It was entered into after June 21, 1988 2. It fails to meet the "seven pay test" (all single premium policies fail the test)

Answer 223

1. Distributions/withdrawals are taxed as LIFO (Interest first) 2. Distributions under 59.5 are also subject to a 10% federal penalty (if not disabled) 3. Death benefit is tax-free

Answer 224

If an interest in a life insurance policy is transferred for cash/property (not a gift) the proceeds in excess of the cash received, combined with any premiums paid by the owner, are taxable as ordinary income

Answer 225

1. The entity is the owner and bene 2. No step up in cost basis

Answer 226

1. The individual is the owner and bene 2. The other owner gets a step up in cost basis

Answer 227

1. Can be diversified away 2. Mainly business risk (how a company is run) and financial risk (how the firm finances their assets)

Answer 228

1. Risk that cannot be removed not matter how well diversified 2. The risk of the overall market

Answer 229

Remember RIP (no default or credit risk) Reinvestment risk Interest rate risk Purchasing power risk

Answer 230

1. Own occupation - best definition for insured 2. Modified any occupation 3. Split definition - own then modified 4. Any occupation (social security definition) 5. Loss of income

Answer 231

Remember PRIME Purchasing power risk - loss of purchasing power through inflation Reinvestment rate risk - risk that proceeds available for reinvestment must be reinvested at a lower rate than the instrument that generated the proceeds Interest rate risk - risk that a change in interest rates will cause the market value of the fixed income security to fall Market risk - risk of the overall market Exchange rate risk - risk associated with changes in the value of currency

Answer 232

All yields are higher than coupon Y - Yield to call M - Yield to maturity C - Current yield A - Annual coupon rate

Answer 233

All yields are lower than coupon A - Annual coupon rate C - Current yield M - Yield to maturity Y - Yield to call

Answer 234

1. Non-marketable, nontransferable, cannot be used for collateral 2. Sold at face value 3. Interest rate based on the 10-year treasury note yields 4. Fixed interest rate that is in effect at the time of purchase 5. Subject to federal taxation when redeemed (unless used as education bonds) 6. Not subject to state or local taxes

Answer 235

1. Non-marketable, nontransferable, cannot be used for collateral 2. Sold at face value 3. Interest rate is composed of two parts (a fixed base rate and an inflation adjustment which changes every six months) 4. Subject to federal taxation when redeemed (unless used as an education bond) 5. Not subject to state or local taxes

Answer 236

Muni bonds that are backed by the full faith, credit, and taxing power of the issuer. GO bonds are usually considered the safest type of muni credit

Answer 237

Muni bonds that are backed by a specific source of revenue to which the full faith and credit of the issue is not pledged. Because revenue bonds are backed by a single source of funds (like toll roads or hospitals) they have a greater credit risk than GO bonds. As such, they trade at higher yields

Answer 238

The insurers pay timely interest and principal when the issuer is in default. Muni bond insurers are AMBAC (American Muni Bond Assurance Corp.) and MBIA (Municipal Bond Insurance Association Corp.)

Answer 239

Remember DRIP Default risk - a creditor may seize the collateral and sell it to recoup the principal Reinvestment risk - as payments are received from an investment, interest rates fall. When the funds are reinvested, the investor receives a lower yield Interest rate risk - Rising interest rates may cause bond prices to fall Purchasing power risk - Inflation may lower the value of bond interest payments and principal repayment, thereby forcing prices to fall

Answer 240

1. Premiums are not deductible 2. Benefits are tax-free

Answer 241

1. Premiums are deductible by the employer as a bonus. (Employee pays ordinary income on premiums) 2. Benefits are tax-free

Answer 242

1. Premiums are deductible by the employer 2. Benefits are taxable to the employee

Answer 243

The tendency for individuals to mimic the actions of a larger group (think FOMO, or when Logan rushes into a uranium stock after news comes out and it runs up 40%)

Answer 244

The tendency to look at recent events (or market performance) and assume that those events or conditions will continue indefinitely Example: The bond market outperformed the stock market for the past year and will continue to do so because of the continued economic downturn

Answer 245

When someone overanalyzes a situation, becomes overwhelmed, and ends up "paralyzed" so that a solution is never determined Example: Investing is too complex so I will analyze all the various asset allocation strategies and create a plan. In the end, the investment plan is never created, and the money is still in cash

Answer 246

When investors are risk averse for gains (they do not want to give them up) but risk seekers when it comes to losses (they will take big risks to avoid realizing them) Example: An investor sold a strong-performing winner to lock in gains without considering whether the investment remains attractive or any other options. Instead the used some of the proceeds from the sale to add to a losing stock in hopes that a partial rebound will cover the loss

Answer 247

Describes how losses have a much greater negative impact than a similar gain will have positive Example: In a traditional way of thinking, the amount of utility gained from receiving should be equal to a situation in which you gained $100 and then lost $50. The result is the same, which is must people view a single gain of $50 more favorably

Answer 248

When someone looks at sums of money differently, depending on their source or the intended use Example: When some investors may divide their investments between a safe investment portfolio and a speculative portfolio in order to prevent the negative returns that speculative investments may have from affecting the entire portfolio

Answer 249

The tendency to make a decision based on the desired outcome rather than on the probability of that outcome Example: The investor wants to double his money in an investment account without doing enough research

Answer 250

The tendency to place too much emphasis on one's own abilities. It often works hand in hand with confirmation bias Example: Overconfident investors tend to believe they are better at timing the market than others even though professional fund managers often struggle

Answer 251

When investors emotionally react towards new market information Example: Good news comes out on a stock that should raise the price accordingly. However, investors overreact by creating a larger-than-appropriate effect on the security

Answer 252

1. The employer is the owner 2. The employee is not a shareholder 3. At surrender or death, the employer gets the greater of cash value or premiums paid and the bene gets the death benefit

Answer 253

1. The employee is the owner 2. The employee is a shareholder 3. The employee assigns the policy 4. At surrender or death, employer received premiums paid while employee gets cash value (or bene gets death benefit)

Answer 254

1. If the death benefit increases by more than $150k the policy could turn into a MEC 2. If the policy increases by any amount and the insured must prove insurability, the policy could turn into a MEC 3. If the death benefit increases by $150k or less and the insured as guaranteed insurability, the policy will NOT lose its grandfathered status

Answer 255

They insure by $250k per individual, per account type at each bank Trusts are insured by $250k per each beneficiary

Answer 256

When an investor finds a recent pattern or study without doing much else research thinking that the same pattern will repeat itself Example: An investor reads a study saying short-term mutual fund winners tend to persist and allocates a portion into said mutual funds without any other research

Answer 257

Coverage that pays the amount an injured insured could have collected from the uninsured driver if such driver had carried auto liability insurance Note: UM is liability protection, NOT medical payments

Answer 258

When they have 20 full/part time employees Only to employees who are participating in the plan

Answer 259

Up to 18 months for the employee and their dependents Any other situation is 36 months

Answer 260

1. The form of the bond being offered 2. The amount of issue 3. The property pledged 4. The protective covenant, including any provision for a sinking fund 5. Working capital and the current ratio 6. Redemption rights, call, put or conversion provisions

Answer 261

Anything tax deferred (pensions or IRAs). Doing so means no phantom income has to be realized

Answer 262

The tendency of investors to do nothing when action is actually called for?

Answer 263

Subconscious beliefs people have regarding money, many of which were developed in childhood. Personal experience and family values can impact money scripts

Answer 264

A money script Feeling that money has a negative connotation and ignoring finances to avoid emotional distress Examples: Money is the root of all evil

Answer 265

A money script Feeling that happiness externally comes from, and is directly related to, having more wealth Example: Compulsive spending towards a never-ending goal of obtaining monetary things to provide happiness

Answer 266

A money script Being concerned and aware of one's financial well-being, with importance and emphasis being placed on savings and being prepared Example: Being overly cautious with money to the extent that enjoyable things (like vacation) are sacrificed

Answer 267

A money script The belief that one's internal value and self-worth is directly correlated to their financial worth, and that to be a better person, they need more Example: Hiding finances from others and associating shame with a lack of money

Answer 268

Cognitive bias, in which a person makes decisions based on whether the various options are presented in a positive or negative way, meaning individuals can tend to overlook factual data The person is more affected by how the information is worded rather than the actual information. This can manifest itself in investment decisions

Answer 269

An economic theory positing that people have a tendency to view their wealth in nominal dollar terms rather than real terms which must take inflation into consideration. This can also be called "price illusion"

Answer 270

The must notify the board within 30 days

Answer 271

1. When an attorney or court subpoenas the file 2. At the client's request 3. As a defense against charges of wrongdoing

Answer 272

1. If they are single with a 2nd source of income 2. If they are married and both work 3. If they are married, only 1 spouse works, but they have a 2nd source of income

Answer 273

1. If they are a single wage earner 2. If they are married and only 1 spouse works

Answer 274

It is current assets/current liabilities where... Current assets: cash equivalents, marketable securities, accounts receivable, inventory Current liabilities: Accounts payable, credit card debt, taxes payable

Answer 275

It should be 36% or lower of gross income

Answer 276

It should be 20% or lower of gross income

Answer 277

It is the four main components of a monthly mortgage payment and should be 28% or lower of gross income Principal Interest Taxes Insurance

Answer 278

$145,200 - $175,200

Answer 279

$160k - $180k

Answer 280

$160k - $180k

Answer 281

1. The donor can retain control 2. Lump sum gift up to $90,000 3. K-12 for tuition allowed up to $10,000/yr 4. Can be used to pay student loans ($10,000/ student over lifetime)

Answer 282

It is when the Fed buys securities. It is expansionary and indicates an easy money policy

Answer 283

It is when the Fed sells securities. It is contractionary and indicates a tight money policy

Answer 284

1. It is the total dollar value of all goods and services produced within the US Only 2. GDP counts economic activity without regard to yearly price fluctuations 3. It does not include any income generated outside the US or adjustments for foreign currencies

Answer 285

It is two consecutive quarters of economic decline (negative GDP)

Answer 286

It is six consecutive quarters of economic decline (negative GDP)

Answer 287

1. Remember BLAT (advice is incidental) Banks Lawyers Accountants Teachers 2. Broker/dealers or reps whose performance is incidental and who get no special compensation for advice 3. Publishers of bona fide newspapers 4. Those who give advice solely relating to US government securities

Answer 288

1. Advisors whose only clients are insurance companies 2. Family offices

Answer 289

1. Initially, the advisor files ADV part 1 and 2 with the SEC 2. Pays a minimum filing fee of $150 3. The RIA must submit part 1 of the ADV and schedule 1 annually

Answer 290

1. The individual associates with a broker dealer 2. They register w/ FINRA through broker/dealer on form U-4 3. Takes and passes appropriate exam 4. Is issued a CRD number (central registration system)

Answer 291

1. Offer & acceptance - 2 parties: offeror and acceptor 2. Consideration - something of value (money) 3. Legal object - legal in purpose 4. Competent parties - principal must have legal capacity to execute contracts 5. Legal form - contract must meet requirements

Answer 292

1. Intoxicated adults 2. Minors for anything other than other than necessities (can execute contracts for food, clothing, and shelter)

Answer 293

Mutual funds, Variable products, and only newly offered UITs

Answer 294

General securities and UITs on the secondary market

Answer 295

The uniform securities agent state law exam

Answer 296

The uniform investment advisor law exam

Answer 297

The combined state law exam. It combines the Series 63 and the Series 65

Answer 298

Written, explicit direction from principal to agent

Answer 299

That which the public believes the individual holds and includes signage, rate books, etc. Implied authority is actual authority that the agent must carry out the principal's business

Answer 300

Arises out of negligence of the principal in allowing the agent to appear to have the authority because of certain actions of the agent in the past. This typically affects terminated agents

Answer 301

Required that new issues purchasers be provided with a detailed prospectus before a purchase was completed

Answer 302

Passed to regulate the secondary market (trading of issued securities). This act also created the SEC to enforce securities laws

Answer 303

Authorized the SEC to regulate UITs and managed investment companies (closed-end& open-end funds) plus variable products

Answer 304

Established the SIPC to supervise securities firms that get into financial difficulties. The SIPC insures investors against losses arising from the failure of a brokerage firm

Answer 305

It is when investors seek patterns that help decisions sometimes without adequate confirming research Example: When the NFC wins the Super Bowl is not a basis for an investment decision

Answer 306

Risk, return, and covariance. The model is sensitive to these inputs Negatively correlated assets are not required

Answer 307

Use the Sharpe ratio

Answer 308

Always try to educate the client

Answer 309

You should say you need to meet with both clients due to the potential conflict of interest

Answer 310

Interest earned minus any costs and commission paid that year

Answer 311

Yes they can

Answer 312

Use the coefficient of variation which is a measure of variability Divide STD by return The higher CV is riskier

Answer 313

Choose the next lower reasonable number under the years to maturity

Answer 314

Choose the next lower reasonable number under the years to maturity

Answer 315

The Dow Jones Industrial Average

Answer 316

The Dow Jones Industrial Average

Answer 317

Yes even though they are taxed at different rates

Answer 318

1. The employee & employer pay 6.2% (FICA) and 1.45% (Medicare) on everything up to $168,600 (total of 15.3% on W-2 earnings) 2. Anything above is only subject to 1.45% (Medicare taxes) which the employee & employer pay (2.9% total)

Answer 319

1. The employee & employer pay 6.2% (FICA) and 1.45% (Medicare) on everything up to $168,600 (total of 15.3% on W-2 earnings) 2. Anything above is only subject to 1.45% (Medicare taxes) which the employee & employer pay (2.9% total)

Answer 320

In the year the adoption is finalized

Answer 321

1. The child tax credit ($1,700) 2. The earned income credit

Answer 322

Refundable credits can generate a tax refund. Non-refundable credits can only reduce your tax liability to zero

Answer 323

The are carried forward and offset future income CANNOT be carried back

Answer 324

No. They can only offset income from other RELPs up to the amount of income

Answer 325

No they are tax deferred

Answer 326

It is for AGI (hence above the line)

Answer 327

100% of profits (including income, STCGs, and non-qualifying dividends) Do not assume that dividends are non-qualified unless the question specifically says so

Answer 328

Form 1040. Used to report income or loss from a sole proprietor ship. Can deduct business expenses from income Income after expenses is subject to self-employment tax (.1413)

Answer 329

Used for Household employees. An example would be if you employ someone to care for your children

Answer 330

The foreign tax credit

Answer 331

The sum of the 1st & 2nd year alimony paid minus $37,500 is subject to recapture

Answer 332

Five years after the gift Do not forget to consider a carry forward to maximize the deduction

Answer 333

Income excludable from taxable income for each dependent Nothing can be claimed as they are suspended with personal exemptions

Answer 334

The benefit x (1- (months early/180))

Answer 335

When NPV is zero

Answer 336

To provide a written disclosure of all information

Answer 337

Only with their permission

Answer 338

Yes. They are automatically published

Answer 339

Only if you have disclosed all compensation agreements

Answer 340

If the lifetime GST exclusion (and therefore gift exclusion) is used up, 1. Calculate the gift tax owed 2. Calculate the GST tax on the remaining gift amount (after subtracting the gift tax owed)

Answer 341

To limit or remove the elective share a spouse could demand if they do not inherit a certain minimum percentage QTIPs will not alone stop demands for elective share

Answer 342

50% of community property assets and 100% of other assets

Answer 343

50% of community property assets and 100% of other assets

Answer 344

Ordinary income assets (like savings accounts)

Answer 345

You as being the remainder bene taints the irrev trust

Answer 346

Income owed to a decedent when they die

Answer 347

Keogh plans, SEP IRA plans, and profit sharing plans

Answer 348

Older employees get bigger contributions Better for owners where a company as a reasonably consistent cash flow outlook and they do not want to reduce their salary

Answer 349

Not if they want to exclude part-time employees since part-time hours are counted in SEP participation requirements

Answer 350

Fear, Faith, Framing, and FOMO

Answer 351

The tendency for investors to hold onto investments due to loyalty toward a company, brand, or even a particular stock they have long-term familiarity with, rather than based on objective financial considerations

Answer 352

An exchange of life insurance policies

Answer 353

Salary and bonuses

Answer 354

The FMV of property on date of death is brought back into the gross estate

Answer 355

Yes, it must be for the purchase of a first home specifically

Answer 356

Not unless it is specifically mentioned

Answer 357

The trustee

Answer 358

Up to 30% of AGI

Answer 359

Yes, they fall under health insurance premium rules

Answer 360

The higher of cash value or premium paid

Answer 361

Disclosing the exact amount of compensation receivable

Answer 362

The lesser of 25% of compensation or $69,000

Answer 363

They can be a co-trustee but there should also be an independent trustee

Answer 364

At a certain point basis will already be fully recovered. An annuity that has been paying out for 20 years is most likely fully taxable now

Answer 365

Because they would taint the trust for estate and income tax purposes

Answer 366

Duration times the interest rate move will give you the amount a bond's price will change

Answer 367

If the charitable deduction is greater than basis, basis is decreased by the difference

Answer 368

As many as there are eligible students

Answer 369

The IRR of cash flow is the exact same as the required return

Answer 370

Anytime when policy dividends are used like cash (cash dividends, dividends used to pay off premiums, etc)

Answer 371

Hire an investment advisor to shift some of that liability

Answer 372

No, it is removed but any taxable gifts are added back to their taxable estate

Answer 373

Not really. It does not necessarily indicate financial strength

Answer 374

Basis is ordinary income at exercise Net unrealized appreciation is LTCG at time of sale Anything after exercise uses capital gains rules

Answer 375

They are still treated as investment income

Answer 376

The death benefit in excess of taxable basis is subject to federal income tax

Answer 377

Only the payments received before age 59.5 will be subject to the 10% penalty

Answer 378

Only if the property has appreciated

Answer 379

No, they could be misleading for shareholders

Answer 380

Once distributions begin to be paid out. The anti-alienation provision only applies during the accumulation period

Answer 381

Yes but they are limited to age-based limitations

Answer 382

Always as ordinary income even if you are a corporation

Answer 383

What discount rate to use

Answer 384

A red herring omits the selling price and size of issue. Still has to be approved by the SEC

Answer 385

It is limited to the cost of the donated item

Answer 386

It is the gift - retained interest

Answer 387

It is limited to basis

Answer 388

It is no longer a fringe benefit and is a taxable death benefit

Answer 389

Improvements are depreciated Expenses are deducted

Answer 390

No unless the question specifically says so

Answer 391

It allows for a $50k single ($100k JTWROS) loss if the stock was for a closely held and/or small corporation

Answer 392

No, only qualified plans get an exception to the 10% penalty

Answer 393

Basis is premiums paid minus cost of insurance Difference between basis and cash value is ordinary income Difference between sale price and cash value is an LTCG

Answer 394

That is one of the goals

Answer 395

As ordinary income

Answer 396

Only in the case of theft

Answer 397

No They are not considered as 50% organizations

Answer 398

Yes, you must file a schedule C as you have to pay self-employment tax

Answer 399

Taking limited income from an S Corp will reduce FICA and FUTA because the remainder will be unearned income (not subject to unlimited medicare taxes)

Answer 400

Yes, they may have a payment for loss assessment and provide a small amount of coverage on a named peril basis

Answer 401

The patient must pay the hospital cost for the first 3 units of blood

Answer 402

No. The Fed does not use it as a tool

Answer 403

No, the child has to be under the age of 16

Answer 404

No. It is an election to expenses tangible personal property

Answer 405

No. The home would have to be owned by the couple for the joint exemption

Answer 406

No, they have a right to all income

Answer 407

They must file a joint return

Answer 408

One annual flu shot and a pneumonia shot

Answer 409

An automatic premium loan

Answer 410

You can reinstate an insurance policy in the case of lapse but you must provide proof of insurability

Answer 411

When alimony paid in the second year is higher than the third year by more than $15k

Answer 412

709 is for reporting gifts. 706 is for estate tax

Answer 413

A calculation that discounts unequal cash flows at a required rate of return less the initial cost of an investment

Answer 414

Yes, depreciation can offset rental income

Answer 415

with other client's money in a common investment fund

Answer 416

Only when AGI is below a given threshold and proceeds are used for tuition and fees

Answer 417

Yes if the missed distribution is reasonable and appropriate steps are being taken. You should file an amended return (1040X) when doing so

Answer 418

No as the payments do not decrease. PITI would only decrease when the mortgage is paid off this way

Answer 419

Contributions are always distributed first and are tax free Earnings are tax free if held for 5-years and they are withdrawn for a reason

Answer 420

Call protection as it prevents the issuer from buying the bond back. Provides some safety from reinvestment risk

Answer 421

A put provision as you could force the issuer to redeem the bond and reinvest at higher rates

Answer 422

Yes and it is an above the line deduction

Answer 423

22% is considered a low bracket. Credits are much better

Answer 424

Yes. It would be better to have the trust purchase the policy to avoid the add back rule

Answer 425

They should begin with the compliance officer at the B/D and move onto next FINRA if necessary

Answer 426

Series 7 for anything that is not accompanied by a prospectus

Answer 427

Yes, a doctor is required to maintain confidentiality

Answer 428

No, they are ineligible

Answer 429

None. The 2017 TCJA repealed the exemption

Answer 430

20% of income generated through a pass-through business up to AGI of $483,900 Anything above that is limited to the lesser of 50% of W-2 wages or 20% of QBI Can be claimed below-the-line even when claiming a standard deduction (Sec 199A)

Answer 431

When joint income exceeds $400k

Answer 432

2 hours every 2 years

Answer 433

Yes, the CFP is in a way advising the client as whether to buy the stock

Answer 434

$38,250 single & $76,000 MFJ

Answer 435

It is the current replacement value less any depreciation

Answer 436

Books, tuition, and equipment for required courses

Answer 437

No, they are only for qualified plans IRAs can still be part of the divorce settlement

Answer 438

They must be a lineal descendent (family member)

Answer 439

No, the principal adjustments are treated as phantom income

Answer 440

It can cause a plan to be disqualified by not counting their commissions

Answer 441

Best practice is when the plan administrator has approved it and that it has entered court and signed by the judge

Answer 442

3 out of 5 years. If a company has a lot of part time employees, but they only stay for a few months, a SEP can still make sense

Answer 443

The interpolated terminal reserve plus unearned premium

Answer 444

They have a right to elect against the will (not called the 50% rule)

Answer 445

By the due date of the business tax return, including extensions

Answer 446

I/Y = annual rate PV = negative present value PMT = negative payment if contributing N = years x periods per year

Answer 447

You should fund one with whatever is over the estate exemption you have

Answer 448

The interpolated terminal reserve plus the unearned premium

Answer 449

When the dividends are used to buy paid-up additions

Answer 450

Yes, but only if it is provided for every employee

Answer 451

10-15 at the bare minimum

Answer 452

The profit of the company. It cannot create a loss

Answer 453

The exercise must be at least 110% of the FMV at the grant date and options must vest in 5 years

Answer 454

Yes and it adds long-term value

Answer 455

No, they are not subject to the 5% distribution rule

Answer 456

Price volatility

Answer 457

Only on the specific properties owned in the US

Answer 458

No, it only worries about full time employees

Answer 459

the amount of the death benefit, even if they establish a beneficiary

Answer 460

Yes, but not as much as options due to the longer time frame

Answer 461

Diversification. Contribute extra money to the smallest held stock that is different

Answer 462

Only if the ISO is disqualified. The excess of FMV over exercise price is treated as compensation and the corporation gets a corresponding deduction

Answer 463

A reverse QTIP election. A dynasty trust would be good but is implemented before death

Answer 464

No, they are subject to the board as a CFP

Answer 465

Consider the most and least important reasons to modify the plan. A second child does not mean it is the most important as they have already planned around parenting before

Answer 466

Yes and they are subject to qualified loan rules

Answer 467

At normal retirement age. The participant would get the account balance fully attributable to him even if the plan was terminated

Answer 468

Short-term bonds due to the lower duration

Answer 469

If someone is above the phaseout of deductibility

Answer 470

The real rate of return

Answer 471

Not until after the divorce, and even after that you could represent both of them with separate contracts

Answer 472

The death benefit minus the loan balance. Cash value has no effect

Answer 473

Basis is the grant price plus AMT paid per share (AMT can increase basis)

Answer 474

IRR as it expresses return considering all cash flows

Answer 475

No, both plans are subject to section 415 deferral limits

Answer 476

Only if it is provided by a governmental employer?

Answer 477

No due to its conduit taxation

Answer 478

if can create undesirable phantom income

Answer 479

Only when they are paid within a 3-year period after the divorce

Answer 480

Indirectly as a lower gross estate leads to lower taxes

Answer 481

Yes if the distribution is taken before age 55

Answer 482

Only if they take a lump sum distribution of the employee's balance. NUA tax treatment is lost on a rollover to an IRA (it would be treated as ordinary income)

Answer 483

No, not until the added person withdraws funds from the account

Answer 484

Yes as the partner would have rights under the deed

Answer 485

No, the partner would need a renter's policy

Answer 486

$77k Single & $123k Joint

Answer 487

1. 1/2 of self employed taxes are deductible (above the line) 2. Premiums paid on health insurance are deductible (above the line)

Answer 488

No. You can only extend your filing to Oct 15th You must pay by Apr 15th

Answer 489

Option B means that the death benefit increases by the cash value

Answer 490

Option A means that only the original death benefit is paid out

Answer 491

Yes, but only on the basis at distribution and then the NUA at sale Anything above value at distribution is a capital gain with no penalty

Answer 492

No. It would be ruled as child support. Only alimony that continues throughout would be deductible

Answer 493

No, that comes later

Answer 494

Yes, if they have been collecting SS disability benefits for at least 24 months

Answer 495

You should apply three months before your 65th birthday so that benefits start when they turn 65

Answer 496

No, they are higher for people with more AGI

Answer 497

Yes, just like any other medical coverage premium

Answer 498

Medicare pays all but a flat deductible for the first 60 days. Anything after that the patient has a copayment

Answer 499

Yes, if the employee has the right to name the bene (incident of ownership)

Answer 500

The gain is taxed as a capital gain