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Flashcards in Quiz 1 Deck (18):

When calculating for net worth, should you add things like car payments and mortgage payments to liabilities?

No. These are cash flows, not liabilities. A car loan is a liability, the payment is a cash flow. A mortgage is a liability, a mortgage payment is a cash flow.


Would increasing the allocation in an emerging market fund decrease risk in a portfolio?

Depends. If it's a small allocation compared to the overall portfolio, yes, since it will have very low correlation to domestic equities. If it's a very large portion of the portfolio, then no, in that case it's very risky.


Can a corporation that issues qualifying ISO's receive a tax deduction for the ISOs at any time?

Yes, if they are DISQUALIFIED.


What is the match for a safe harbor 401K?

3% match dollar for dollar on the first 3%, then $0.50 on the dollar for the next 2%. 3% + 1% = 4% total match.


Does paying alimony into a spouse's IRA give you a deduction? If you offer an IRA to everyone in your company on top of your 401K, can you deduct a contribution to it?

No, the spouse gets to deduct it. It's their money now. Offering the IRA to all your employees doesn't necessarily mean you get to deduct a contribution to it.


Which recommendation could reduce GSTT tax after the death of the grantor?

A Reverse QTIP. The decedent can still use their GSTT exemption when the reverse QTIP is elected by the executor, after death.


Whether the CFP is a financial planning practitioner

Whether the client is a family member of the planner or a financial institution

Whether the terms and conditions of the loan are reasonable and fair to the client

The three considerations by the CFP Board in regards to when it is appropriate to lend money to a client or borrow from them.


Can a client take a qualified college education loan from their TSA? (Tax sheltered annuity, aka 403(b) plan)

Yes, these have the same loan provisions as a 401k.


When alimony is paid year 1 and 2 but not 3, how do you calculate the amount that needs to be recaptured?

Year 1 + Year 2 - 37,500 = Recapture at the end of Year 3


If a defined benefit plan is terminated by an employer, how much of it is vested?

The plan is 100% vested.


Is long term capital gain property given to a 50% organization as a gift limited to 50% of AGI in gift value?

No, LTCG property is limited to 30% of AGI, even if given to a 50% charity.


Judgement, decree or court orders realting to child support, alimony payments and marital property rights refers to what?

A QRDO. Qualified Domestic Relations Order.


If a husband has a 401k and the wife has no qualified plan, can they both deduct their IRA contributions to calculate their AGI?

No, only the wife could since the husband is taking part in a qualified plan. Watch the questions for AGI calculation to specify if one of them is in a qualified plan already.


Which principle is violated when you let an intern present a plan and recommendations you made to a client who was expecting you to do it?

You have violated Professionalism. Sharing information with the intern does not violate confidentiality as he is an employee under an NDA. Careful of this one.


If the tax rate is going from 39% to 50%, what would happen to the price of municipal bonds?

There would be increased demand for new munis to escape the higher taxes, so prices would rise and coupons would drop, making the new ones less attractive than old ones.

The value of OLD munis would increase since they'd have much higher coupons.


If interest rates and inflation react positively (running parallel), what is the spread between them called?

Real return.


If one spouse has earned income, can both do a Roth IRA contribution?

Yes, given that they are under the phase out.


Are profit sharing plans subject to minimum funding standards?