PSA 1 Flashcards by Tom Anichini

Medicare A Skilled Nursing benefit

Benefit lasts first 100 days

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HO-2

Policy payment with appreciation, depreciation, coinsurance

Actually coverd / (Should have covered * Coins) * damage – Deductible

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CESA

Contrib tax deductible?

No. The benefit is earnings are not taxed

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Limit on losses due to RE (active part)

Can deduct up to $25,000 against active and portfolio income

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Qualified plan offering

Simplicity
Integration with Social Security
Flexible funding
Ability to invest primarily in company stock
In-service withdrawals
Distribution of benefits in cash if desired
Deductible employer contributions

Profit sharing plan and

Stock bonus plan

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Are CLATs revocable?

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COBRA divorce lasts how long?

36 months

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Ratio Percentage Test

NHCE % / HCE % covered

>= 70%

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Average Benefits Test

NHCE / HCE avg. ben

>= 70%

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Gift amount of appreciated assets

(FMV > adjBasis)

Carryover basis (incl. donee’s gift tax, if any)

Carryover holding period

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Income tax treatment of involuntary conversion of real property

1033 allows deferal of gain

If received prop > FMV, gain not recognized
If the amount reinvested in replacement property is less than the amount realized, the realized gain is recognized to the extent of proceeds not reinvested.

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Nonrecognition treatment

If converting to money, Elective

If replacement property, Mandatory

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FDIC Insured Amount

One person, multiple accounts/instruments

Max $250/depositor/institution/category

Single
- savings accounts, CDs, NOW accounts, checking accounts, and money market deposit accounts
Joint
- All co-owners must be natural persons. Legal entities such as corpora-tions or partnerships are not eligible for joint account deposit insurance coverage.
- Each co-owner must have a right of withdrawal on the same basis as the other co-owne
Trust accounts
Retirement accounts invested in bank investment products

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Alimony and Child Support

Incl in AGI?

Alimony

Not Child Support

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Which is included in AMTI?

Excess of depletion deduction over the adjusted basis
Excess of fair market value above the exercise price if exercised for freely transferable ISOs

Yes, both

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SEP rules: Loans?

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Basis deduction election

up to 50% AGI

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Do private annuity payments consist of consist of a partial return of basis, capital gain, and ordinary income

Yes

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Taxation of Group Term Life as ER Benefit

Premiums up to the first $50,000 of face value paid by ER are tax exempt for EE.

For any amount of group term life insurance coverage greater than $50,000, the scheduled premium per $1,000 per the Uniform Premium Table is included in the employee’s W-2 income

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Payment on Homeowner’s claim

Coverage / (Should have covered * coinsurance)

– Deductible

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COBRA 18 v 36

18: Vol. or invol. termination
36: Death, divorce, legal separation

(neither list is nec. exhaustive)

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Required account value for margin account

Loan amount + MV_current * Maint %, where

Loan amount = (1 - initial margin%) * MV_initial

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Medicaid look-back period for assets transferred < FMV

60 months

If a transfer was made within the look-back period, the individual will be ineligible for benefits for the length of time equal to the amount transferred divided by the average monthly cost of nursing home care for the region (i.e., if the asset transferred is worth $10,000 and the monthly regional cost is $1,000, the individual will be ineligible for 10 months)

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Do ISOs or NQSOs create AMT adjustment upon exercise?

ISO: Yes

NQSO: No

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What type(s) of plans does PBGC cover?

Only DB (incl. Cash Balance)

How does Life Ins. proceed change if age misrep?

Beneficiary will only receive the amount of death benefit that the annual premium would have purchased at her actual age

Are gifts and child support incl. in AGI?

Are these included in AGI? Cash div Lottery prize Earnings Alimony LTCL

Yes LTCL deducted up to $3,000

Which step most urgent to reduce Gross Estate? 1. Add daughter to brokerage acct. JTWROS 2. Transfer life ins. on self to daughter 3. Transf. residence to an irrev. living trust 4. Gift residence to daughter

Transfering life ins. will be removed from GE if survives 3 years 3-year rule does not apply to trust or gift Brokerage acct. would not work becaus decedent supplied 100%

Charitable deduction Basis election v FMV

Basis: up to 50% AGI FMV: up to 30% AGI

Holding period requirement to excl. gain from TI S 1202 stock

5 years

Do sales of vacation homes qualify for S 121 gain exclusion?

No!

Does a profit sharing plan require a J&S annuity

Tax treatment of interest on Treasuries

Exempt from state tax!

May private annuities be secured by collateral?

May you transfer from Trad IRA to HSA?

One time, up to the HSA limit

Gift of loss property

Basis for gain: Donor's adj. basis (no gift tax!) Basis for loss: FMV

May a recipient of a SCIN require security as collateral?

Yes

What does a SCIN need to be effective?

A risk premium to reflect risk of cancellation

At seller's death, what happens to PV of SCIN balance?

Excluded from Gross Estate

Alternate valuation date Two exceptions

1. Residence sold prior to AVD 2. Wasting assets, such as patents, annuities, and installment notes, which are valued at DOD

Which is included in AMTI? * Net appreciation on long-term capital gain property donated to a public charity.

SEP rules: Mandatory ER contrib?

Which does the Fed control? Prime rate Fed Funds Discount rate

Discount rate

Max CFP suspension period

5 years

Can CFP Board punishment be Additional CFP continuing ed credits

Evidently

Cliff vesting permitted in 401(k)

3-year

Difference between Government Pension Offset and Windfall Elimination Provision

W is for Worker. Based on own comp history GPO is for spousal AND survivor benefits

Do SEPs permit life insurance?

Max total contribution to SIMPLE IRA

EE Annual limit $13,500 + 2% \* min(Comp, limit 285,000)

SIMPLE vesting of ER contrib

Immediate

Money purchase plan Adjusted contribution percentage

20% Applies only to self employed, not to their employees

Indexed Annuity Floor, Cap rate, Participation rate

Taxation on loans from MECs

LIFO Ord. income tax on Gain 10% early penalty if \< 59-1/2

How long does Short-Term Dis. Ins. cover?

Up to 2 years

How long does Long-Term Dis. cover?

Typ. from 2 years to a spec. age, typ. 65

LTC: Chronically ill

Unable to perform 2 of 6: Eat Bathe Dress Transfer bed to chair Toilet Continence

ISO AdjBasis

Grant price

ISO exercise AMT adjustment

Bargain element is Positive Adjustment

What is an HO-8 policy for?

Older Victorian homes whose replacement value greatly exceeds current value

NQSO Cashless Excercise

1. Zshares \* X = Ord. Income 1. Need to sell Y shares to cover cost 2. = Ord. Income \* (1+marg) 3. Y = S / {Ord. Income \* (1+marg)} 2. Receive Z – Y shares

May LTC be paid for by FSA?

No!

Income taxes on Split-dollar Life Ins Death Benefits

Zero!

Nonqualified annuity principal/earnings basis

LIFO if not over life expectancy

Medicare Part A premium?

Not if person or spouse has 40+ Medicare credits

Like-kind exchange When property was for sale

Like-kind rule don't apply! Especially to RE dealers

Carryover basis for a gift on which no gift tax was paid

Grantor's adjBasis (original cost less depreciation) unless FMV is lower on date of gift

IRS six-year statute of limitations applies

If taxpayer omits an amount in excess of 25% of gross income

Combined failure to file and failure to pay penalty

Two are netted against each other File: 5%/month Pay: 1/2%/month Max 5%/month Max 25%

How much passive loss is allowed?

If disposed, all of it If kept, netted -\> prorata

excess net passive income tax applies to

S corps

Tax rate on CGs from collectibles

28%

Tax rate on CGs from commercial prop

25%

Is Section 2503(b) trust is a simple or complex trust?

Simple, becauses all income must be distributed annually

Can a non-citizen become one in order to qualify for marital deduction?

Evidently

May the executor elect to pass estate into a QDOT?

Evidently

Benefit of gifting insurance over land or cash

Adjusted taxable gift (if survives 3+ years) may be lower = Cash value at time of gift

Stock redemption buy-sell agreement

Corp is owner, pays premiums, is ben.

Why won't putting house into irrev trust qualify for Medicaid?

60 month Look-back period

Is transfer to a GSTT trust a direct skip?

Yes

GSTT Annual Exclusion

Lifetime exclusion allowed for lifetime skip transfers

Is QPRT eligible for annual gift tax exclusion?

No! Remainder interest, not present interest

QPRT qualify for Ch. 14 Zero Valuation Rules?

No, because grantor continues to reside

Private annuity: Secured by collateral?

Does a life estate coupled with a limited power of appointment qualify for the marital deduction?

No, because it is a terminable interest

Is a corporate recap a substitute for buy/sell agreements?

No, it is a generation transfer method

Does GE include irrev. trust?

No!

Difference between Qualified disclaimer and Election against the will

QD: made by heir EAW: Made by disgruntled spouse

Gift recipient's basis when gift tax was paid

Grantor's adj. basis + Grantor's gain / FMV \* Gift tax paid

What is wrong with a grandparent-owned 529?

Although excluded from assets for FAFSA, while the child is attending college reduce future financial aid determinations by 50% two years after distribution

May a trust w/ spendthrift clause serve for educ.?

Yes

Disadv. of UTMA for educ

1. Assets are included at the higher student rate when determining EFC 2. Earnings within the account may be taxed at the parent's marginal tax rate 3. Account ownership automatically transfers to the child when the age of majority is attained 4. Funds in the account are not portable and are unable to transfer to a different beneficiary

Whose asset is an UGMA?

Child's

Is UGMA income tax-free?

How long receive SS Disability to qual. Medicare?

24 months

COBRA after term. gross misconduct

None for EE None for childre

Coverage C ins on residence at another location

50% Prop at that location: 10% cov, or 5%

Limit on collecting when contributory negligence

$0!?

Max salary deduction for Dependent Care FSA

$5,000

Form ADV Part 2A

Prior to or at time of contract, Must provide or Must provide information on