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Flashcards in Quiz 3 Deck (19):

Can someone with a SIMPLE take RMDs when they retire if they retire later than 70 1/2?

No, they have to begin taking distributions at 70 1/2 even if they're still working.


If its one premium, its a MEC. If a MEC bought with one premium of 30K is worth 50k (40k cash value and 10k dividend cash value), and they take a loan for 30k, what's the taxes and penalties?

20,000 will be ordinary income tax (30,000 basis and 50,000 value) plus the 10% penalty. 10,000 of it will be a tax-free return of basis, since she paid $30K and is withdrawing $20k in gains (30 - 20 = 10 return of principal).


Client tells you to assume an unrealistic inflation. Which should you not include in your calculations:

1) his crazy ones
2) your projections
3) Current year inflation
4) 10 year inflation
5) 100 year inflation

3) the current year. The current year does not establish an average and isn't telling of the future. Sample size data is needed.


Are taxable gifts included in the gross estate?

No, they are included in the TAXABLE estate. It's in the name dummy.


In a MEC, are dividends used to purchase paid-up additions considered income-first distributions?

No. They are not. They are reinvested in the contract and never actually paid as income to the client.

Cash dividends, interest on policy loans, and dividends retained as principal interest on a policy loan are income-first distributions.


If a client is receiving substantially equal payments from his IRA before 59 1/2, and then also take a hardship withdrawal before 59 1/2 while receiving the payments, is he charged a 10% penalty?

Yes, the full withdrawal for hardship is subject to the 10% penalty.


How many days does a firm in excess of $100 million have to report their ADV to the SEC before the end of their year?

90 days before the end of their year.


Do non-cancellable insurance policies have guaranteed future rates (they can't change the premium?)

Yes, they have guaranteed future premiums.


Are profit sharing plans age weighted? Can they contribute in excess of 25% to individual employees?

Yes and yes.


If someone is under $99,000 phaseout and contributes $10,000 to their 401k, can they make a deductible IRA contribution that year?

Yes, they would be below the $99k phaseout. If above $99k, the answer is no.


Are PSPs, SIMPLE, SARSEP, and 403(b) subject to FICA and FUTA?

Yes. Deferrals to these are subject to FICA and FUTA.


If you buy a partner's life insurance in a cross purchase buy-sell and they die 1-year later, is that a transfer for value?

Yes. This would be a transfer for value issue.


To remove life insurance policies from your own estate and also your spouse's estate, what should you do?

Gain ownership of your policies and then gift them to an ILIT with your specified beneficiaries.


If a company has stock redemption plan insurance policies, who owns and is the beneficiary of these policies?

The company both owns and is beneficiary of stock redemption plans funded by insurance.


If I buy Maggie's 200,000 term life policy for $1,000, pay $4,000 premiums and then Maggie dies, how much of the insurance proceeds are taxable?

I would pay taxes on $195,000 (200k - the money I've spent on the policy).


When a medicare policy says its a $165 specified amount, who pays that $165?

The insured client pays that much per day. Medicare would pay the excess. i.e. $365 per day cost, client pays $165 and medicare would cover the $200 difference.


You cant deduct a loss for any loss from any sale or disposition of stock within a period beginning 30 days before and after the date of the sale.

This is the Wash Rule. If there is a gain, there is no wash rule. It's only a wash if it creates a loss.


If a home is destroyed, what do you multiply the FMV by to calculate the replacement value for insurance?


250k insured, 350k FMV

250k / (350k* .8) = .89286

.89286 * the loss = the amount insurance will pay


What do prepaid tuition plans pay for?

Only tuition and mandatory fees.