Taxes

Question 1

Progressive tax

Answer 1

Variable rate, low income - low rate, high income - high rate

Question 2

Regressive tax

Answer 2

Flat rates, everyone pays the same

Gas, alcohol, tobacco taxes

Question 3

Long term cap gains tax rate

Answer 3

15%, unless income 400k or more, then 20%

Question 4

Capital losses

Answer 4

An investor can claim 3k each year as a write off, can be carried over

Question 5

Qualified dividends

Answer 5

Taxed at 15%, cash dividends received on stock held more than 60 consecutive days

Question 6

Wash sale rule

Answer 6

If stock sold at loss, cannot by same stock for 30 days prior or after sale and claim the write off

Can’t use convertibles, warrants, rights or options of the same stock either.

Can use preferred of the same stock or bonds of the same company.

Question 7

Tax bond swap

Answer 7

Sell a bond at a loss, but a different bond of another issuer to improve portfolio and get write off, must have at least 2 of 3 differences
Issuer, coupon, maturity

Question 8

Corporate taxes

Answer 8

70% of cash divs are tax free, if company owns 20% or more of the company

Question 9

Gift taxes

Answer 9

14k annual gift exclusion, lifetime exclusion 5.43mm

Actual gift tax is 40% (amounts beyond the exclusion

Question 10

Gifting securities

Answer 10

Recipient assumes donor’s cost basis - that is, they are on the hook for the capital gains taxes

Question 11

RMD

Answer 11

Must begin April 1st year after 70.5, otherwise 50% penalty

Question 12

Taxes on non-qualified plans

Answer 12

LIFO

Question 13

Keogh plan

Answer 13

Self employed income, max contrib 20% gross but no more than 53k

Question 14

Ira contribs

Answer 14

$5500, if over 50 1k catchup

Question 15

Ira assets

Answer 15

US mint coins and securities

Cannot include - commodities, stamps, coins or LI

Question 16

Ira w/d exclusions

Answer 16

1st time home buyers, college, qualified medical expense

Question 17

Roth w/d

Answer 17

Held at least 5 yrs and 59.5 age

Question 18

Education (Coverdell) savings acct ESA

Answer 18

Roth-like, annual 2k contrib for kids under 18,tax free if used for educational expenses, must be used before age 30 or rolled to another family member, if not 10% penalty

Question 19

529 contrib

Answer 19

14k annual or 5 yr accelerated 70k

Question 20

SEP

Answer 20

Simplified employee pension, ER contribs (pretax) fully vested, max contrib 53k or 25% gross income whichever is less

Question 21

Simple

Answer 21

100 ee’s or less, no other plan, pretax contribs from ER and ee, max contrib $12,500, plus 3k 50yr catch up

ER contrib 3% or 2%

Question 22

403b

Answer 22

Public schools and non-profits, ee contribs 18k, ER 35k total of 53

6k catch up

Question 23

ERISA

Answer 23

Employee retirement income security act 1974, covers qualified plans, participation, vesting, funding, communication, and non-discrimination

Question 24

401k

Answer 24

18k ee, 35k ER, total of 53k, 6k catch up

Question 25

Profit sharing

Answer 25

ER contribs only, required to contrib specific% of corp profits, max 53k

Contribs are discretionary

Question 26

Money purchased plan

Answer 26

See profit sharing except MPP is mandatory contrib

Question 27

ESOP

Answer 27

Similar to profit sharing, except cash used to purchase stock

Question 28

Non-qualified corporate plans

Answer 28

Ee defers taxes and ER defers deductions

Question 29

R/O

Answer 29

Must be completed w/in 60 days to avoid taxation, 1 yr wait btwn r/o’s

Trustee to trustee transfer does not count

Question 30

HSA

Answer 30

Must have high deductible plan, can’t be covered by Medicare, tax fre w/d if for qualified medical expenses, otherwise 20% penalty

Question 31

How are bonds taxed?

Answer 31

Ordinary income on interest, LT/ST cap gains if sold before maturity

No cap gains if held to maturity

Question 32

Accretion

Answer 32

Used on discount bonds, pay ordinary income tax on annualized interest earned, need to add what you get back to your basis, see example

Question 33

Amortization

Answer 33

Used for premium bonds, tax write off for annual losses on a premium bond, cost basis reduced each yr by amount of annual write off, used as deduction from ordinary income