Exam 2

Question 1

When assets are transferred, who pays the tax and how will the gain on the sale be taxed?

Answer 1

The new owner maintains the cost-basis and is responsible for capital gain tax.

Question 2

Is PRINCIPLE on home mortgage an itemized deduction?

Answer 2

NO

Question 3

Is INTEREST on home mortgage an itemized deduction?

Answer 3

YES

Question 4

The existence of a COMMON LAW marriage is dependent upon

Answer 4

the intent and behavior of the parties in addition to the laws in the state of residency

Question 5

What should you request to review to determine other sources of income from clients?

Answer 5

Tax returns
W-2s
1099s

Question 6

When does spousal support STOP being taxable to the receiving spouse and deductible to the spouse paying?

Answer 6

December 31, 2018

Question 7

Child contingency rule

Answer 7

an IRS regulation that dictates how payments designated as alimony in a divorce or separation agreement are treated for tax purposes when they are reduced or terminated due to events related to a child.

Question 8

If spousal support is re-characterized as child support, what are the likely consequences?

Answer 8

The amount of spousal support that is recharacterized would be deemed non-deductible because child support is not deductible to the payor or taxable
to the recipient.

Question 9

the relationship between child support and spousal support

Answer 9

As spousal support increases, child support decreases.

Question 10

What is spouse able to apply for at full retirement age (FRA)?

Answer 10

Mindy can elect to receive the higher of her own or one-half of her current husband’s benefit. She is no longer eligible to receive one-half of Philip’s benefit
as she is remarried.

Should she divorce she would then be eligible for one-half of which ever ex-spouse has the higher benefit.

Question 11

realized capital gain vs exclusion amount

Answer 11

realized capital gain is an actual amount of money that the client received for the sale of the house

exclusion amount is the portion of it that wont be taxed. $250k or $500k

Question 12

Gross income calculation

Answer 12

bi-weekly gross salary x 26 pay periods / 12 months

Question 13

Net income calculation

Answer 13

bi-weekly salary minus deductions x 26 pay periods / 12 months

Question 14

How long does the IRS have to perform a random audit of a joint tax return?

Answer 14

3 years

Question 15

How long does the IRS have to audit a joint tax return when FRAUD is involved?

Answer 15

Anytime

Question 16

automatic revocation statutes

Answer 16

To void beneficiary designations to an ex-spouse after divorce

An automatic revocation statute automatically revokes a spouse as a beneficiary in the event of divorce

Question 17

What tax form waives the custodial parent’s right to claim the children as dependents

Answer 17

8332

Question 18

How are capital loss carryforwards allocated between a divorcing couple?

Answer 18

Losses on separately owned property belong to the spouse that owned the property.

Question 19

To be eligible for COBRA coverage after divorce the qualified beneficiary must notify the plan administrator of the qualifying event within what time period?

Answer 19

60 days

Question 20

20/20/20 rule

Answer 20

1. Being married for 20 years
2. Military spouse having served for 20 years
3. Have 20 years of marriage that overlap the 20 years of military service

Question 21

Which filing status has the highest standard deduction amount?

Answer 21

Surviving Spouse and Married Filing Jointly

Question 22

What is the personal exemption amount?

Answer 22

0

Question 23

TWIN CAN LAW is a mnemonic to help recall which states have

Answer 23

community property

Texas
Washington
Idaho
New Mexico

California
Arizona
Nevada

Louisiana
Alaska
Wisconsin

Question 24

What is a form of Alternative Dispute Resolution?

Answer 24

Mediation

Question 25

Interrogatories and depositions are forms of

Answer 25

discovery and positional bargaining a negotiation

Question 26

What happens to the cost basis of property that is transferred from one spouse to the other pursuant to a divorce?

Answer 26

Under IRC §1041 The cost basis is equal to the original cost of the property plus any improvements

Question 27

What Is Depreciation Recapture

Answer 27

(IRS) collects taxes after you sell business assets at a value higher than the book value used to cut your taxable income However, in a divorce the transferee and not the transferor may be subject to recapture. Transferee will be subject to recapture for the excess depreciation

Question 28

What happens when an annuity contract is assigned pursuant to a divorce decree?

Answer 28

The recipient spouse gets the transferor's investment in the contract

Question 29

What does the Retirement Equity Act of 1984 do?

Answer 29

requires qualified plans to use a QDRO to divide the assets in a divorce.

Question 30

Are Qualified retirement plans marital or separate property?

Answer 30

In most states, Qualified Retirement plans are considered to be marital property

Question 31

What is required to be in QDRO

Answer 31

The name and address of the participant The amount or percentage of the participant's benefits to be paid to the alternate payee The number of payments or period for which payments are required

Question 32

What will the Department of Labor (DOL) do with a recipient's unemployment benefits when he or she has an outstanding child support payment?

Answer 32

The DOL will deduct the child support payments, then send the recipient the remaining unemployment wages

Question 33

How are assets divided in a community property state?

Answer 33

Everything that was acquired during the marriage, other than acquisitions by inheritance or gift, is divided 50/50 between the spouses.

Question 34

How is property divided in an equitable distribution state?

Answer 34

MARITAL property is divided In an equitable manner.

Question 35

UTMA fact

Answer 35

The account belongs to the minor after it is set up

Question 36

What does tax code section 72 (t)2(c) cover?

Answer 36

It allows the non-employee spouse to take a one time distribution from the participant spouse's 401(k) plan without paying the tax penalty

Question 37

Which state do the parties ELECT to have their property treated as community property

Answer 37

Alaska

Question 38

What is the only tax benefit a NON-CUSTODIAL parent may qualify for?

Answer 38

Child tax credit

Question 39

Which type of support has NEVER been tax deductible to the payor or taxable to the recipient?

Answer 39

CHILD SUPPORT Spousal support was tax deductible prior to Dec 31, 2018