QBank TakeAways

Question 1

25,000 Allowable Loss

Answer 1

Real Estate loss deduction for active participant

Full $25K allowed if MAGI is below $100K
Phaseout for MAGI between $100K - $150K

[(150 - MAGI)/$50K] x 25K

Question 2

$100K - %150 K Phaseout

Answer 2

Real Estate loss deduction for active participant

Full $25K allowed if MAGI is below $100K
Phaseout for MAGI between $100K - $150K

[(150 - MAGI)/$50K] x 25K

Question 3

500K (MFJ) / 250K (Single) Allowable Exclusion

Answer 3

Sale of primary residence (sec 121)

Allowable Exclusion - $250K (If stayed for 2 years)
Prorated Exclusion for less than 2 years - (# of months stayed / 24) X 250K

Question 4

Usage & Ownership Test for Sec 121

Answer 4

Both spouses must meet the usage test AND One spouse must meet ownership test

Question 5

403(b) Investment Options

Answer 5

Can invest in Sponsored Mutual Funds or Annuities

Question 6

SIMPLE IRA Eligibility - Earning Requirements

Answer 6

Must have earned $5K in last two years and reasonably can expect to earn $5K in current year

Question 7

Age Requirements for Kiddie Tax

Answer 7

under age 19 or
under age 24 if full-time student

Question 8

A-Trust Features

Answer 8

Qualifies for Marital Deduction = Yes
Surviving spouse has power of attorney = Yes
Includes in Decedent’s Estates = NO
Included in the Surviving Spouses Estates = Yes

Question 9

DNI Taxation

Answer 9

With DNI, bene will be responsible for taxes on LESSER of DNI or amount required to be distributed according to trust document.

Question 10

How is income from 2503(b) or 2503(c) trust taxed?

Answer 10

Income from minor’s trust is taxed UNDER KIDDIE TAX rules

Question 11

QPRT Basis

Answer 11

Heirs acquire the carry-over basis (original basis of the grantor) + Any improvements made

Question 12

TIP Estate Tax Consequences

Answer 12

RECEIVING Spouse (donee) Will NOT include property in their gross estate at death

GIFTING spouse (donor) will REMOVE the property from their estate

Question 13

TIP Gift Tax Consequences

Answer 13

TIP = GIFT
DONOR spouse = CANNOT gift-split
DONOR spouse = CANNOT take marital deduction
DONOR spouse = CAN take annual exclusion for present interest gift

Question 14

Which properties are NOT includable in the gross estate?

Answer 14

Gifted property within 3 year of the death of the donor

UNLESS - donor has RETAINED interest in life estate, re-visionary interests or revocable trust and life insurance policies owned by the insured

Question 15

What is the amount of tax due for assets transferred into QTIP trust through QTIP election?

Answer 15

no tax due as assets transferred via QTIP election are considered marital deductions which are unlimited.

Question 16

What does grantor of QPRT receive in exchange for transferring the property into the trust?

Answer 16

access to the property and possession of the property

Question 17

3 Types of generation-skipping transfers (GST)

Answer 17

Taxable Distributions
Taxable Termination
DIRECT skip

Question 18

GST - Taxable Distributions

Answer 18

Any distribution of income or corpus from a trust to a skip person that is NOT subject to estate or gift tax.

Question 19

GST - Taxable Termination

Answer 19

The termination by death, the lapse of time, release of power, or otherwise of an interest in property held in a trust resulting in skip persons holding all the interests in the trust

Question 20

GST - Direct Skip

Answer 20

A transfer subject to an estate or gift tax made to a skip person.

Question 21

Tax-exempt Gifts

Answer 21

Gift made DIRECTLY to educational institution for TUITION ONLY
Gift made DIRECTLY to a medical provider/institution for an individual’s medical expenses

Question 22

TIP Exceptions

Answer 22

Marital deductions are NOT available for TIP

Exception: Marital deductions are allowed ONLY IF
(1) Spouse is given a life estate in trust and is given a general power of appointment over the trust corpus.
(2) Q-TIP Election is made by donor or executor

Question 23

Taxable gifts and gift tax

Answer 23

Taxable Gift = FMV of property or Cash value of the gift - $18K Annual Exclusion

Gift Tax = 40%

Total Gift Tax Liability = Taxable Gift X Gift Tax

Question 24

Basis & HPR of appreciated property Gift

Answer 24

DONEE Basis = Donor’s basis
DONEE HRP = Donor’s HPR

Question 25

Basis & HPR of loss property gift

Answer 25

IF subsequently sold at a loss (Less than the FMV at the time of the gift) DONEE basis = FMV at the time of the gift DONEE HPR = HPR begins at time of the gift IF subsequently sold between FMV of gift and Donor's Basis (in between) = No gain or loss to Donee IF subsequently sold between ABOVE FMV of gift: Donee's basis = donor's basis Donne's HRP = donor's HPR

Question 26

What are the gift tax return filing requirements for gift splitting?

Answer 26

The donor spouse files the gift tax return if split gifts are less than the annual exclusion; the other spouse shows “consent” on Form 709.

Question 27

Bond price sensitivity to changes in the interest rates

Answer 27

Bonds with SHORTER maturity and HIGHER coupons are LESS sensitive to interest rate changes

Question 28

Factors that influence an investor's capacity for risk are?

Answer 28

Time Horizon Liquidity Needs Total Investable Assets

Question 29

The probability of a return falling within +/- 1 SD of the average is

Answer 29

68%

Question 30

The probability of a return falling within +/- 2 SD of the average is

Answer 30

95%

Question 31

The probability of a return falling within +/- 3 SD of the average is

Answer 31

99%

Question 32

When you want to profit from appreciation of a given stock AND you have no need for current income, what options strategy should be used?

Answer 32

Buy a call (Right to buy stocks at an EP and you want to buy a low EP < MP = bullish)

Question 33

Examples of higher risk investments

Answer 33

Common and preferred stock Junk bonds Options, futures and forwards Small-cap and growth-oriented funds

Question 34

What strategy to use if you are subject to AMT in the current tax year

Answer 34

Accelerate income into the AMT year Defer tax deductions until a regular tax year

Question 35

items of income in respect to decedent (IRD)

Answer 35

Defered Annuity Immediate Annuity Period Income ER Qualified Retirement Plans - 401K, TSA, Company Pension Plans IRAs EE Bonds Salary, Bonus, Commissions, Rental income Lottery Winnings, any other income (Capital Assets - bank accounts, CDs, stocks, bonds, mutual funds, real estate and business assets are not items of IRD)

Question 36

ADL for qualified LTCi Claim qualification

Answer 36

BED (Bathing, Eating, Dressing) COT (Continence, On-off the Toliet, Transfering) (Walking is NOT an qualified ADL)

Question 37

If ____ % of REIT Income is distributed to sharedholders, that income is tax free to the REIT

Answer 37

90%

Question 38

At least _____ % of REIT's assets and income must be derived from real estate equity or mortgages

Answer 38

75%

Question 39

Which type of life insurance policy provides cash value subaccounts NOT subject to insurance company's creditors in the event of the insurance company's bankcrupy?

Answer 39

Variable Universal Life Insurance Policy

Question 40

What tools Fed uses to manipulate the Money Supply?

Answer 40

Discount Rate Reserve Reqs Open Market Activities (Buy/Sell Securities)

Question 41

Statistical measure that is used to quantify NON-DIVERSIFIABLE risk

Answer 41

Beta (NON-DIVERSIFIABLE = SYSTEMATIC) (Std Deviation is used to measure diversifiable riks)

Question 42

Avg tax rate is always _______ than marginal tax rate

Answer 42

LOWER Than

Question 43

IRA Distribution Form & Partial Withdrawl from Annuity

Answer 43

1099-R

Question 44

Minimum vesting schedule for cash balance plan

Answer 44

3-yr cliff

Question 45

Which ER sponsored retirement plans are covered by PBGC?

Answer 45

Cash Balance Pension Plan Traditional Defined Benefit Pension Plan (Only DB Plans are covered by PBGC)

Question 46

Accounts that CANNOT pay for NON-Tuition K-12 expenses

Answer 46

529 (upto $10K in TUITION expenses for K-12 students can be distributed from 529. NON-Tuition K-12 expenses paid from 529 account are NOT eligible for preferential tax treatment) These accounts CAN pay for non-tution K-12 expenses: Coverdell, UGMA, UTMA

Question 47

Max Period for RMD for inherited traditional IRA

Answer 47

For anyone above 21, End of 10 yr following decedent's death

Question 48

______ the maturity of a bond and ______ the coupon, the LESSER the sensitivity of the bond's price to interet rate changes

Answer 48

SHORTER the maturity and HIGHER the coupon, the LESSER the sensitivity of the bond's price to interest rate changes

Question 49

Measure of Risk that includes SD

Answer 49

CML (Capital Market Line) (SD = total risk) (SML, CAPM, Treynor Ratio use Beta as mesure of risk)

Question 50

How much of the Traditional IRA Contribution is deductible when 401K contribution is maxed for the year?

Answer 50

If you are an active participant in an employer-sponsored retirement plan, IRA contribution deduction depends on the MAGI Phaseout