Teach Flashcards
1
Q
5 and 5 power
A
- Right to withdraw min(5%, $5,000)
- Noncumulative
- Unwithdrawn amount included in GE at 5% * trust value
2
Q
Future interest gifts
A
Require filing gift tax returns
3
Q
Ltd or Special POA
A
Excluded from holder’s GE
4
Q
Reverse QTIP
A
- Treats the QTIP property as if the QTIP election was not made for GSTT purposes
- Assets in a QTIP trust will be included in the surviving spouse’s gross estate at death, regardless of whether a reverse QTIP election was made
5
Q
Section 303 stock redemption
A
Permits the estate of a decedent shareholder to redeem the decedent’s shares with favorable income tax treatment.
- Transaction will be treated as a disposition of an asset (capital gain) rather than receipt of a dividend (ordinary income). This is especially advantageous because the shares received a stepped-up basis at death, and thus, the capital gain or loss is only measured from the DOD instead of the predeath basis.
- Conditions
- Stock included in GE
- Stock value > 35% AGE.
- Redemption proceeds eligible for capital gain treatment cannot exceed federal and state death taxes plus deductible funeral and administrative expenses
6
Q
DNI
A
Excludes capital gains and principal
7
Q
Retained Life Interest
A
Whether in writing or just an understanding
Included in GE
8
Q
Government Pension Offset
A
SSWB or Survivor Benefit reduced by 2/3 Govt Pension
9
Q
Explain how to process SS insurance credits/eligibility
A
10
Q
What are permitted 401(k) match vesting schedules
A
2 - 6 year, or
3-year cliff
11
Q
Distributions from a Roth IRA are ordered as:
A
- From regular contributions (no tax, no penalty)
- From conversions, FIFO (no tax, subject to penalty if attributed to conversion within 5 years)
- Earnings (subject to income tax and the 10% early withdrawal penalty)
12
Q
Determine the taxable portion of an IRA distribution
A
After-tax contributions / Balance *
Distribution
13
Q
Explain what happens when a plan is top-heavy
A
- Must use either 3-year cliff or 2-6 year vesting
- Must contribute 3% for all non-key EEs
14
Q
Max contribution to SEP IRA
A
$19,200
- $13,500 EE
- $5,700 ER
15
Q
Limit to convert to a QLAC in a qualified plan
A
min(25%, $135,000)
16
Q
What is the consequence of not electing NUA?
A
Entire distribution taxed as ordinary income at time of distribution
17
Q
How much is the max OOP limit for an HDHP?
A
$6,900 single
18
Q
PAP Part D
A
Damage to your auto
19
Q
Describe how a cashless NQSO exercise works
A
- Calculate cost of exercise
- Calculate cost of ordinary income tax on bargain element
- (1 + 2) / FMV = # shares to be sold
- # Exercised - (3) = # shares received
20
Q
If nonqual. annuity distributed, which tax rules apply?
A
LIFO
21
Q
Explain damages available under contributory negligence
A
None
22
Q
What are the income tax consequences of a loan from a MEC?
A
- LIFO. Ordinary income tax on gain (cash surrender - premiums)
- If younger than 59-1/2, 10% early withdrawal on gain
23
Q
Headcounts for COBRA and PBGC
A
20 and 25
24
Q
Medicare A premium
A
Most people don’t pay because they or a spouse have 40 credits
25
Explain HO-3 Coverage B
Other structures
10% of Coverage A
26
Built-in Gains tax
* Applies only to S corps that formerly were C
* Paid by entity, not by shareholdes
27
Passive activity losses
* May offset only passive gains
* Phased-out deduction ($25,000/$12,500 S) for rental real estate
28
1231 Assets
Depreciable **real or personal** property used in a business
* Capital assets are personal property (vehicle or residence), and are disposed either as a Capital Gain or nondeductible
* Long-term assets are capitalized (depreciated, amortized, etc) and expensed over its useful life
* Timber, coal, and iron ore
* Livestock
* Unharvested crops
* Goodwill and intangibles
29
1231 Gains and Losses
* Losses may be carried forward 5 years
* Gains are Capital
* Gains offset by loss carryforwards are Ordinary
30
Maximum # investors in Private Placement
Tony Esposito
31
How much of a qualified plan's life insurance payout is subject to income tax?
The **cash surrender value**, less any costs included in income by the decedent during the decedent's lifetime, is subject to income tax.
32
Exception to the 21 & 1 Rule
2 years, 100% vested
33
Incidental benefit rule
* \<=50% ER contrib to DC for whole life
* \<=25% ER contrib to DC for term or universal
34
UBTI exclusions
* Leverage for ESOP
* Royalties
* Incidental rents
* Dividends and interest income
* Gains from the disposition of property
35
Prohibited actions
* Full-time EE paid extra for svcs to plan
* \>10% DB plan assets in ER stock
* \>10% DB plan assets in real property
36
50 / 40 Rule
DB plans must cover min(40% elig,. 50 EEs)
37
Determine the Top Heavy test
* Who is a Key EE?
* Which employers will be treated as single employers?
38
Explain Top-Heavy
\>60% balances or accrued benefits to KEEs
39
Maximum Excess Percentage
Min(2x base, Base + 5.7%)
40
Chapter 14 Rules
1. Section 2702 of Chapter 14 severely limits the advantage of a grantor retained interest trust (GRIT) between related parties by valuing the retained income interest at zero when the transfer is made for the benefit of a member of the transferor’s family, and an interest is retained by the transferor or an applicable family member
2. Remainder interest valued at FMV as if an outright gift had occurred
3. Exceptions from the zero value rule:
* QPRTs
* GRATs
* GRUTs, and
* tangible personal property trusts.
41
Form ADV, Schedule I
* Filed each year
* Indicates still in business
* Informs of changes to business
* Submit a current balance sheet?
42
Stock redemption buy-sell agreement
1. Life ins. proceeds tax-free to business
2. Bus. buys out decedent's share
3. Decedent's estate does not recognize a taxable gain
43
Max distribution period for EDB
* If Spouse, may roll over or keep taking per decedent's schedule
* After decedent began RMDs, Bene's life expect minus 1 each year
* Prior to RMDs, may be longer of
* According to EDB's expectancy
* According to decedent's expectancy
44
Max distribution period for non-EDB
10 years
45
Explain SEPs
Employer-sponsored IRA or individual annuity
* Contrib min($57,000, 25% Covered Comp)
* May be adopted as late as the tax filing date
* Fully vested and portable
* May be integrated with SS
* ER does not have to contribute each year
46
SS Credit in 2020
$1,410
47
Describe SIMPLE 401(k)s
* Employer contributions 100% vested
* Employers may not match less than 3%
* EEs may not make after-tax contributions
* No 25% penalty like on SIMPLE IRAs
48
Describe ideal target benefit plan sponsor
EEs include older owners and younger rank-and-file
49
Eligible 457 plan
Pretax EE contributions are permitted
1. Public plans
1. Plan assets in trust, shielded from creditors
2. May rollover to a 401(k), 403(b), Roth IRA, and other 457
2. Non-church controlled tax-exempt plans
1. Not shielded from creditors!
2. Participation
1. Church: All EEs
2. Non-church: Key EEs
3. Rollover ONLY to other 457
50
Ineligible 457
Top-hat plan
* Similar to other non-qual def. comp
* Subject to forfeiture
* Subject to creditors
* No rollovers!
51
SIMPLE 401(k)
1. No 25% early wd penalty
2. ER contributions 100% vested
3. Match cannot be less than 3%
4. EEs may not contribute after-tax
52
Premature distribution without 10% permitted:
1. Receives QDRO
2. Receives periodic payments until greater of (5 years, age 59-1/2)
53
Chronically ill
2 ADLs
90 days
54
PAP required coverage(s)
Liability
That's it! That's the list!
55
Pairs and sets
Repair or replace any part of the set to its pre-loss value
56
Qualified LTC policy
* Guaranteed renewable
* Meets consumer protection provisions
* Limited only to qualified long-term care services
* Cannot pay for Medicare reimbursable expenses
* No surrender value or other money that can be borrowed, paid, assigned, or pledged
* All refunds of premiums or dividends must reduce future premiums or increase future benefits (i.e., no payouts)
57
Activities of Daily Living (ADLs)
1. Bathing
2. Eating
3. Dressing
4. Transferring from bed to chair
5. Maintain continence
6. Use the toilet
58
PAP XXX / YYY / ZZ
$XXX,000 bodily injury to one person
$YYY,000 for all persons in a single accident
$ZZ,000 property damage in a single accident
59
What will Currently Insured get you?
6 credits in last 13 quarters
1. $255 Death benefit
2. Survivor benefit if
* Spouse if caring for child \< 16 years old
* Unmarried child \< age 18, \< age 19 if still in high school
60
Negligence per se
* Situation in which the act itself constitutes negligence (drunk driving)
* Injured party does not have to prove negligence
61
Constructive receipt v
Economic benefit rule
_Constructive receipt_
* When has the ability to access the funds or if the funds are securely set aside
_Economic benefit rule_
* Irrevocable transfer of funds made on the executive's behalf that provides a benefit to the executive
62
Gift of remainder interest
Not eligible for annual exclusion!
63
Lapses of General Powers
Valued at excess above 5% for three years
64
Adjusted taxable gifts
Incl in GE
FMV at date of gift minus annual exclusion
65
Terminable interests and Marital deduction
N/A!
Lifetime estates are terminable
Unless spouse is only income recipient of CRAT or CRUT
66
Overqualified
Used too much marital deduction, not enough lifetime gifts
67
Reverse QTIP
68
Eight General HO Exclusions
1. War
2. Neglect
3. Power failure
4. Water damage
5. Intentional loss
6. Nuclear hazard
7. Earth movement
8. Ordinance or law
69
Twelve Basic Named Perils
1. Fire
2. Hail
3. Theft
4. Smoke
5. Aircraft
6. Vehicles
7. Lightning
8. Explosion
9. Windstorm
10. Volcanic eruption
11. Riot or civil commotion
12. Vandalism or malicious mischief
70
Eighteen Broad Named Perils
Basic Named Perils 1–12, plus
1. Falling objects
2. Weight of ice, snow, or sleet
3. Accidental discharge or overflow of water or steam
4. Sudden and accidental damage from artificially generated electrical current
5. Freezing of a plumbing, heating, air-conditioning, or automatic fire sprinkler system or of a household appliance
6. Sudden and accidental tearing apart, cracking, burning, or bulging of a steam, hot water, air-conditioning, or automatic fire protective sprinkler system, or from within a household appliance
71
HO-2 Coverages
A Dwelling: Broad
B Other struct: Broad
C Personal Prop: Broad
D Loss of Use: Broad
72
HO-3 Coverages
A Dwelling: Open
B Other struct: Open
C Personal Prop: Broad
D Loss of Use: Open
73
HO-4 Renters Coverages
A Dwelling: N/A
B Other struct: N/A
C Personal Prop: Broad
D Loss of Use: Broad
74
HO-5 Coverages
A Dwelling: Open
B Other struct: Open
C Personal Prop: Open
D Loss of Use: Open
75
HO-6 Condo Coverages
A Dwelling: Limited
B Other struct: N/A
C Personal prop: Broad
D Loss of use: Broad
76
HO-8 Coverages
A Dwelling: Basic
B Other struct: Basic
C Personal Prop: Basic
D Loss of Use: Basic
77
HO 4, 6, 8
Renter's
Condo
Historical homes
78
Biggest difference between HO 3, 5, and 15
HO 3 broad form (used to be most prevalent)
HO 5 open peril on everything
HO3 can be endorsed to make it an HO 5
79
Terms of COBRA coverage
18 mos: Termination, or Reduction in hours
29 mos: EE or bene meets SS def. disabled
36 mos: Death, Separation, Divorce, Benes when EE Medicare
80
Gift loans of $10,000 or less
Not subject to gift tax
unless donee uses to invest in income-producing property
81
Uniform Probate Code
* Revokes any will provisions regarding a former spouse by subsequent divorce or annulment
82
AGI Contribution Limits for
Private Nonoperating Foundations
30% Cash or Ord. income
20% any other type
83
AGI Limits for Public Charities
Cash: 60%
Ord. or Tang. Unrelated: 50% min(FMV, basis)
Intang, Related, Real: 30% FMV or 50% Basis
84
HCE 414(q)
\>5% owner
- OR -
Comp \> $125,000
85
Key EE 416(i)
* 5% Owner
* 1% Owner & Comp \> $150,000
* Officer & Comp \> $180,000
86
Average Deferral Percentage (ADP) rules
NHC: ≤2%
HCE: 2xNHC
NHC: \>2% but ≤8%
HCE: NHC + 2%
NHC: \>8%
HCE: 1.25 \* NHC
87
Average Contribution Percentage (ACP) rules
NHC: ≤2%
HCE: 2xNHC
NHC: \>2% but ≤8%
HCE: NHC + 2%
NHC: \>8%
HCE: 1.25 \* NHC
88
Safe Harbor Matching
Obviates need to meet ADP/ADC testing
Match must be 100% vested
89
Safe Harbor Matching Pctgs
0% / 0%
1% / 1%
2% / 2%
3% / 3%
4% / 3.5%
5%+ / 4%
90
Perils covered
1 - 12: 1, 8
1 - 18: 2, 4, 6, (3 on personal property)
All except excl.: 5, (3 on buildings)
91
Liability limits
Comprehensive: $100,000
Damage to others' prop: $250 to $500
Med. pmts. to others: $1,000
92
Eight General HO Exclusions
1. War
2. Neglect
3. Power failure
4. Water damage
5. Intentional loss
6. Nuclear hazard
7. Earth movement
8. Ordinance or law
93
Twelve Basic Named Perils
1. Fire
2. Hail
3. Theft
4. Smoke
5. Aircraft
6. Vehicles
7. Lightning
8. Explosion
9. Windstorm
10. Volcanic eruption
11. Riot or civil commotion
12. Vandalism or malicious mischief
94
Eighteen Broad Named Perils
Basic Named Perils 1–12, plus
1. Falling objects
2. Weight of ice, snow, or sleet
3. Accidental discharge or overflow of water or steam
4. Sudden and accidental damage from artificially generated electrical current
5. Freezing of a plumbing, heating, air-conditioning, or automatic fire sprinkler system or of a household appliance
6. Sudden and accidental tearing apart, cracking, burning, or bulging of a steam, hot water, air-conditioning, or automatic fire protective sprinkler system, or from within a household appliance
95
New Comparability Plan
* DC, either Money Purchase or profit-sharing
* Contrib favor HCE
* Owner/Exec. class may contrib limit $57K
* Works well with different aged owners
* May define classes in different ways
* Service
* Title
* Division
* Comp
* Age
* Class
* Combo
* If fails nondiscrim, shift alloc to non-HCE one at a time until passes
96
ER contrib into Roth 401(k)?
Not permitted
May convert later
97
All inherited property is
Long-term
98
At-risk rules
Deduct loss only up to amount at-risk
Suspend rest
99
Transfer-for-value exceptions
1. transfers to the insured
2. transfers to a partner of the insured
3. transfers to a partnership in which the insured is a partner
4. transfers to a corporation in which the insured is an officer or shareholder
5. transfers to a transferee (such as a child), whose basis in the policy is determined by reference to the transferor’s basis (tax-free exchange or gift)
