Triggers Flashcards

Question

For Social Security Taxation on Provisional Income, what are the break points and taxation %'s for **Single**?

Answer 1

**$25K + $34K** **50% + 85%** * **$0 - $25K** = **0%** Taxable * **$25K - $34K** = **50%** Taxable * **+$34K** = **85%** Taxable

Answer 2

**$32K + $44K** **50% + 85%** * **$0 - $32K** = **0%** Taxable * **$32K - $44K** = **50%** Taxable * **+$44K** = **85%** Taxable

Answer 3

* **+$0** = **85%** Taxable Applies only if living in the same household during the year.

Answer 4

The maximum percentage of Social Security benefits that may be subject to income tax **is 85%**. **A minimum of 15% will always be tax-free.**

Answer 5

* Money earned by either spouse, post-marriage * Property purchased by either spouse, post-marriage * Commingled separately owned assets and community property assets

Answer 6

* Property acquired by either spouse prior to marriage * Gifts to an individual spouse while married * Inherited assets bequeathed to either spouse, individually, while married

Answer 7

A tenancy by the entirety is a **specialized form of joint tenancy with rights of survivorship** existing between **co-tenants** who are married. The estate is based on the **common law** concept of **"spousal unity"** - that married couples are treated as one person.

Answer 8

The **Greater** of **$1,300** or the amount of (**earned income + $450**) up to **$14,600**

Answer 9

* The annual exclusion. * The annual **contribution** made to the trust. * The **greater** of $5,000 or 5% of the **amount transferred into the trust**.

Answer 10

**CFP = 3!** A CFP Hearing Panel must consist of **at least three persons**. A majority of the Hearing Panel must be CFP® professionals, and a majority must be DEC members.

Answer 11

1. **B**athing 2. **E**ating (Feeding Oneself) 3. **D**ressing 4. **C**ontinence (Maintaining Continence) 5. **O**n / Off Toilet **Grooming** – The ability to perform basic self-care, such as brushing hair and teeth. 6. **T**ransferring BED COT

Answer 12

* Age 50 Catch Up = $7,500 **Special Catch Up** * Available for employees with a minimum of **15 years of service** with the sponsoring school or 501(c)(3) employer. * Additional deferral allowance up to **$3,000** per year. * May be used in the same year as age 50+ catch-up. * Age 50+ with 15 years of service may defer up to **$33,500** (2024) ($23,000 + $7,500 + $3,000). **403 = $3K Bonus**

Answer 13

* Age 50 Catch Up = $7,500 **Special Catch Up** * Available for the **last three years of service** (at plan normal retirement age) * **Unused deferrals** from past service * Up to **twice the normal contribution limit ($46,000 in 2024)** *** The age 50+ catch up allowance of $7,500 (2024) may not be used in the same tax year as the special catch-up allowance is used**. **457 = $46,000** * Section 457 deferrals are NOT aggregated with other salary deferrals in applying annual maximums. * NOT considered an “active participant” for IRA deduction purposes.

Answer 14

1. **Participant-Directed Accounts** 2. Max EE/ER contributions **$69,000** 3. Max compensation in benefit formula **$345,000** (covered compensation limit ) 4. Vesting at least **3-year cliff, or 2-6 year graded** 5. Max employer contribution **25% of covered payroll** 6. Favors **younger** participants 7. **Easy to understand** 8. **No PBGC insurance**

Answer 15

1. Flexible year-to-year employer contributions (**no annual requirement**) 2. Contribution must be **"substantial and recurring" 3 of last 5 years** 3. **100% employer funded** 4. Yearly **profit not required** by company to make contributions 5. Allows in-service **hardship withdrawals and loans** 6. ER contribution can be **100% in employer stock** 7. Typically **not subject to QJSA** 8. **"Age-weighted"** traditional profit-sharing plan **can skew higher plan contributions to older participants**

Answer 16

1. **Cash or Deferred Arrangement (CODA)** provision added to **profit-sharing plan (most common)**, **stock bonus plan**, or **ESOP** 2. EE Contributions up to lesser of **1) 100% of Comp 2) $23,000 (50+ $30,500)** 3. **ER not required to contribute** annually but usually matches 4. Allows in-service **hardship withdrawals and loans** 5. ER contribution can be **100% in employer stock** 6. EE's must be given min. of **3 diversification alternatives** for their contributions (elective deferrals) 7. If EE participates in **multiple plans, contributions are aggregated** to max allowed ($23,000 + $30,500) 8. **EE** contributions subject to **ADP** testing. 9. **ER** contributions subject to **ACP** testing.

Answer 17

1. **Mandatory annual employer contributions** 2. **100% employer funded** 3. Defines employer contributions - **% of comp** 4. No more than **10% employer stock** 5. No in-service withdrawals until **age 62** 6. Subject to **QJSA** Income **over $276,000** not included (**$69,000 MAX** is 25% of $276,000)

Answer 18

1. **Requires** mandatory **annual employer contributions** 2. **100% employer funded** 3. **Actuary** determines contributions to **reach target benefit** 4. Can **skew higher contributions to older participants** 5. Actuary only used **initial year** - **contributions not adjusted each year** thereafter 6. Final benefit not guarenteed, **it is a target** 7. No more than **10% employer stock**

Answer 19

1. Plans **GUARENTEE Final Benefit** 2. Max annual pension **$275,000** 3. Max compensation in benefit formula **$345,000** 4. Insured by **PBCG** 5. Vesting at least **5-year cliff, or 3-7 year graded** 6. **Cash Balace Plan must use 3-year cliff vesting** 7. **Joint & Survivor payout** unless waived 8. No participant-directed accounts - **employer bears all risk** 9. **No predetermined** max deductible **ER contribution** 10. **Annual actuarial** work required 11. Must also **satisfy 50/40 rule**

Answer 20

1. **Guarentees monthly pension** 2. **Older, high-earning participants** can have substantial funding on their behalf 3. Common formula is a **% of pay times # of years of service** 4. **No individual accounts** 5. Accruing a benefit of any account is **"active participation" for IRA deduction purposes** 6. If participant is married the pension must be **joint and survivor unless spouse waives (notarized)**

Answer 21

1. **"Hypothetical" participant accounts** for record keeping 2. **Not partipant-directed** 3. **Guarenteed cash balance** at plan's normal retirement age 4. Each year EE accrues plan contribution based on **"pay credit" (% of comp) plus "interest rate credit"** 5. Provides **uniform benefit accrual for all EE's** 6. EE can **convert guarenteed cash balance into lifetime pension** (annuity) 7. Considered **easier for EE's to understand** than a Traditional Defined Benefit Pension Plan

Answer 22

* **Owns more than 5% of the company** that sponsors the plan at any time during the current or previous plan year * Earns more than a set dollar amount **($155,000 for 2024)** from the company in the previous year

Answer 23

1. Payment history (35%) 2. Amounts owed (30%) 3. Length of credit history (15%) 4. New credit (10%) 5. Credit mix (10%)

Answer 24

**Over 800** = **Exceptional** 740 - 799 = Very Good **670** - 739 = **Good** 580 - 669 = Fair **Under 580** = **Poor**

Answer 25

The **executor** elects Q-TIP treatment on **Form 706** and **‘qualifies’** the decedent’s estate for the **marital deduction**.

Answer 26

With a **Pooled Income Fund**, the donor gifts property to a charity and **receives an annual pro-rata share of income from the charity’s commingled funds, for life**. Additional gifts can be made to the fund to increase the donor’s income stream. The charity manages the fund which **cannot invest in tax-exempt securities** and **receives the remainder when the donor’s income interest ends**. Income Stream = Pool

Answer 27

**Non-related persons**: A skip person was born **between 37 ½ and 62 ½ years** after the transferror.

Answer 28

A trust with a **sprinkle** or **spray provision** permits the trustee to make **discretionary distributions** from the trust **to the beneficiaries**. This sprinkle/spray provision **makes gifts into the trust ineligible for the annual gift-tax exclusion.**

Answer 29

**Step 1**: [(FMV – Basis) ÷ (FMV – Annual Exclusion)] = **Appreciation Factor** **Step 2**: Multiply the ‘Appreciation Factor’ by the Gift Taxes Paid = **Gift Tax Adjustment** **Step 3**: Add Gift Tax Adjustment to orignal basis to find **Adjusted Basis**

Answer 30

**529** account funds **can be used for up to $10,000** of annual **tuition costs** associated with **K-12 education**. The remainder of expenses must be covered from other funding sources (i.e., CESAs, savings accounts, scholarships, grants, loans).

Answer 31

When an investor takes on significantly more risk following losses, they are exhibiting **break-evenitis**.

Answer 32

**Chapter 7 Bankruptcy** * A **liquidation** type of procedure. * **Most debts are discharged after 115 days** from the date of filing for Chatper 7. But certain obligations **must still be paid back**: * Child Support * Alimony * Income Taxes less than 3 years past due * Student Loans * Secured Debt **Stays on Credit Report 10 Years** **LUCKY 7 - They forgive it all!**

Answer 33

**Chapter 13 Bankruptcy** * A **wage-earner repayment** type of plan. * Allows debtors to keep their personal assets, but they are obligated to **repay debt in full over a period**. * To be elegible, individual must have no more than **$466,275 in unsecured debt (CC Bills & Personal Loans).** * And no more than **$1,395,875 in secured debt (Mortgages & Car Loans)**. **Stays on Credit Report 7 Years** **Servideos - 13 - Foreclosure - Have to Repay**

Answer 34

**Chapter 11 Bankruptcy** * **Intended for businesses** but also accomodates those who exceed Chatper 13 debt limitation or lack regular income. * **Reorganization** **Stays on Credit Report 10 Years**

Answer 35

Right to know **Costs & Terms** of Credit

Answer 36

Right to **Fair Opportunity** to Obtain Credit

Answer 37

Right to know **what's in your Credit File**

Answer 38

Right to have **Billing Mistake Resolved**

Answer 39

Righ to be **Protected from Collection Agencies**

Answer 40

If you withdraw money from a Health Savings Account (HSA) **before age 65 (not 59.5)**, and the funds are not used for qualified medical expenses, you'll face: * **A 20% penalty on the amount withdrawn.** * **Ordinary income tax on the withdrawn amount.** However, **after age 65, you can withdraw funds for any reason without the 20% penalty,** but non-medical withdrawals are still subject to income tax.

Answer 41

1. The Accumulation Phase 2. The Distribution Phase

Answer 42

1. Options & Futures 2. Common Stock 3. Preferred Stock 4. Corporate Bonds 5. Government Bonds 6. CDs (cash alternatives) 7. Treasury Bills (cash alternatives)

Answer 43

**Beta** is the measure of **systematic** or **non-diversifiable risks**.

Answer 44

Current Yield = Annual Coupon ÷ Market Price

Answer 45

Instead of the actual costs of operating an automobile while performing the donated services, the law permits a deduction of **$0.14 cents** per mile. And the cost of tolls and you can elect to use actual gas expenses as opposed to the standard $0.14 per mile.

Answer 46

* **Failure to File** [applies for a max of **five months**] = (0.05% x 5 months) x $10,000 = $2,500 * If both the Failure to Pay Penalty and Failure to File Penalty are applied in the same month, the Failure to File Penalty is reduced by the amount of the Failure to Pay Penalty for that month, for a combined penalty of 5% for each month or part of a month that the return was late. * **Failure to Pay** applies **beyond 5 months** [only applies for the 1 ½ months, prorated to 2 months] = (0.005 x 1 ½ months) x $10,000 = $100

Answer 47

If a taxpayer does not identify the specific block at the time of sale, shares sold are treated as **coming from the earliest block purchased (i.e., FIFO)**.

Answer 48

1. Interest 2. Dividends 3. Capital Gains 4. Rental and Royalty Income 5. Non-Qualified Annuities 6. Income from business of day trading stocks or commodities 7. Income from businesses that are passive activities

Answer 49

A terminally ill individual is someone who has been certified by a physician as having an illness or physical condition that can reasonably be expected to result in death in **24 months** or less after the date of certification.

Answer 50

* Bob is claiming benefits 5 years after FRA. Benefits are increased **8% for each year delayed to age 70**. * Bob’s benefit is increased by **24% (3 x 8%)**. His benefit is **$3,720 ($3000 x 1.24)**. * Kevin is claiming benefits 5 years early and his benefits will be **reduced by the maximum amount of 30%**. His benefit is **$2,100 ($3000 x 0.70)**. * Their combined monthly benefits are $5,820.

Answer 51

* If he claims retirement benefits age 65, he is claiming benefits **24 months prior to FRA** and his monthly benefit will be **reduced by 13%. 5/9% x 24 months = 13%**. * **He will receive 87% of his PIA.** * **1 - 0.13 = 0.87**

Answer 52

* In 2024, a person must have **less than $943 a month** in unearned income **to receive SSI** (A **couple can get SSI** if they have unearned income of **less than $1,415 a month** in 2024). * A person with a Special Needs Trust who gets **SSI can earn up to $1,971** a month in 2024 (**$2,915 for a couple**) and still get SSI.

Answer 53

1. General Power of Appointment, or 2. Qualifying the Terminable Interest Property (Q-TIP election).

Answer 54

**25%** penalty tax on undistributed amount * Know that if the **first RMD is deferred until April 1 of the year following the attainment of age 73** * The owner must make the second RMD by the end of that year, as well.

Answer 55

In an **A-B trust** arrangement, the surviving spouse has the right to all income and corpus from the **A-trust** and income if needed from the **B-trust**. Only the property from the **A-trust** is included in the surviving spouse’s estate.

Answer 56

* The maximum capital loss per year for Single, Head of Household, and MFJ. is limited to **$3,000**. * The maximum capital loss per year for Married Filing Separately is limited to **$1,500**. * If a net capital loss is more than these limits, you can carry the loss forward, **indefinitely, to later years**.

Answer 57

1. Earned Income Credit 2. Additional Child Tax Credit 3. American Opportunity Credit 4. Premium Tax Credit **EAAP! 3 Vowels and a Premium** *"Can I buy a vowel with my refund?"*

Answer 58

1. Child and Dependent Care Credit 2. Child Tax Credit 3. Retirement Savings Contribution Credit 4. Lifetime Learning Credit **No Vowels and No Premium Refund**

Answer 59

**3-Letters!** **Moody’s:** Aaa, Aa1, Aa2, Aa3, A1, A2, A3, Baa1, Baa2, Baa3 **S&P/Fitch:** AAA, AA+, AA, AA-, A+, A, A-, BBB+, BBB, BBB-

Answer 60

**2-Letters!** **Moody’s:** Ba1, Ba2, Ba3, B1, B2, B3, Caa, Ca, C **S&P/Fitch:** BB+, BB, BB-, B+, B, B-, CCC, CC, C, D (Default)

Answer 61

**Private annuity** payments are **unsecured** promises to pay a **monthly fixed payment** to the seller **for life** and are received by the seller as a **tax-free** return of adjusted basis, capital gains, and interest taxed as ordinary income.

Answer 62

**Non-MEC** Cash Value Life Insurance Policy * Taxation at Death Benefit = **Transfers Tax-Free** * Order of Cash Value Distributions = **FIFO (Basis First)** * Character of Taxable Distributions = **Ordinary Income** * Penalty for Taxable Distributions = **No Penalties**

Answer 63

**MEC** Cash Value Life Insurance Policy * Taxation at Death Benefit = **Transfers Tax-Free** * **Order of Cash Value Distributions** = **LIFO (Gains First)** * Character of Taxable Distributions = **Ordinary Income** * **Penalty for Taxable Distributions** = **10% if Prior to Age 59 1/2**

Answer 64

* Ages 64, 65, 66 = **5/9 decrease per Month** Full 3 years = **20% Reduction** * Ages 62, 63 = **5/12 decrease per Month)** Full 2 Years = **10% Reduction** * **If taken at 62 = 30% Reduction from FRA** *(FRA x 0.70)

Answer 65

* Ages 68, 69, 70 = **2/3 increase per Month** * **8% Increase Per Year** Full 3 years = **24% Increase** * **If taken at 70 = 24% Increase from FRA** *(FRA x 1.24)

Answer 66

1. Cars 2. Patents (Intellectual Property) 3. Copyrighted music/art 4. Life Estates 5. Remainder Interests

Answer 67

Can the donor spouse take a marital deduction? **No** Just the tip = Not Married = No Deduction **Q-TIP trusts are established** when the decedent spouse wants to give the trust corpus to **children from a previous marriage**

Answer 68

**Medicare Part A** provides **skilled nursing care** in a facility for up to **100 days** per benefit period. **Medicare Part A does not have an annual deductible**, but, rather, **a deductible applies for each “benefit period.”** Essentially, this deductible applies **per hospital admission** with a few exceptions.

Answer 69

At the **commencement of an investigation**, a Respondent must deliver to CFP Board Counsel **a document acknowledging receipt of the Notice of Investigation** within **14 Days** from delivery to Respondent of the Notice of Investigation. Respondent must deliver to CFP Board Counsel a document acknowledging receipt of the Notice of Investigation within **14 calendar days** from delivery to Respondent of the **Notice of Investigation**.

Answer 70

A **living will** is used when an individual is **terminally ill**, **permanently unconscious**, or **incapacitated**, that describes desired medical treatment concerning **end-of-life care** or **life-savings measures**.

Answer 71

**Filing Status Following Death of a Spouse** Tax Year Filing Status * Year of Death = MFJ or MFS * 1st Year After Death = Qualifying Widow(er) with Dependent Child * 2nd Year After Death = Qualifying Widow(er) with Dependent Child * 3rd Year and Beyond = Head of Household (HoH) or Single

Answer 72

**Primary Insurance Amount (PIA)** is the monthly retirement benefit at Full Retirement Age (FRA).

Answer 73

**The federal estate tax is calculated in five steps**: 1. Determining the value of the gross estate. 2. Arriving at the adjusted gross estate. 3. Determining the taxable estate. 4. Calculating the federal estate tax payable before credits. 5. Applying the allowable credits to arrive at the net federal estate tax.

Answer 74

Under a cross-purchase buy-sell agreement, the following formula must be used to determine the face amount of each policy: **n x (n - 1)** Since there are 3 business owners (Anne, Gloria, Hank): **3 x (3 - 1) = 6 policies** The valuation of the company is $9,000,000. **Divide this valuation evenly into 6 policies** to determine the face amount of each: **$9,000,000 ÷ 6 = $1,500,000 each**

Answer 75

* **Section 1245 property** is **‘personalty’** used in a trade or business for the production of income. * Examples of **Section 1245 property** include **furniture, computers, carpet, and decorative light fixtures**. * A **barn used for inventory storage** in a business would be categorized as **Section 1250 property**. **1245 = Think 45's = Think Personality**

Answer 76

A **mutual will** is a will made in agreement with another person to **dispose of certain property interests**.

Answer 77

**Federal estate tax** is usually payable by the **decedent’s executor** on the date the return is due, which is within **nine months** of the decedent's death.

Answer 78

**Whole life insurance** is most likely to be a **participating policy**, meaning the policy **pays dividends**.

Answer 79

With an **entity purchase plan**, the number of policies needed is **equal** to the number of partners and/or shareholders. * **5 owners = 5 policies** * When setting up a buy-sell agreement with a larger number of partners, entity purchase plan is the more efficient method.

Answer 80

* Owner = Compensation x **.9235** Wage Base = **$168,600 x 0.153** (Social Security & Medicare) Wages Over **>$168,600 x 0.029** (Medicare Only) *Employees = **Compensation x 0.0765** (ER Portion of SS & Medicare)

Answer 81

* Beginning with the **first taxable year** for which the individual made a Roth IRA Contribution. * Example: Jon made a 2023 contribution in January 2024, the clock starts **January 1, 2023**. * The IRS considers a contribution made in January 2024 for the 2023 tax year **as if it were made in 2023**. This means Jon’s 5-year period for qualified withdrawals (e.g., tax-free earnings withdrawals) **starts on January 1, 2023**, and **will end on December 31, 2027**.

Answer 82

A standard **HO-5 policy** typically provides coverage for contents at a limit of **50% of the Part A – Dwelling coverage** limit.

Answer 83

Member of the **Reserves** are able to deduct expenses (travel, meals, lodging) if **performing services** & **100+ miles** from home. When both criteria are met, the Reservist will use the **federal per diem rate**.

Answer 84

The annual depreciation would be $1,214 [($10,000 - $1,500) ÷ 7] using the straight-line method. The 7-year useful life is applied for office furniture. Since this is the first year of service, Jeremiah must apply the **half-year convention**. As a result, only **50% of the annual depreciation is available**: **$1,214 ÷ 2 = $607**

Answer 85

* Only **spouses** may hold the property as tenants by the entirety. * Property held in tenancy by the entirety can only be severed with **the consent of both spouses or by divorce**.

Answer 86

**A trustee** is a party to whom property is transferred by the **grantor** and **receives legal title** to the property placed in the trust. The trustee: * Manages, distributes, and accumulates income + principal * Must follow a formal written agreement (i.e., terms of the trust) for the benefit of the beneficiaries. * Serves as a fiduciary.

Answer 87

According to the Fitness Standards, **a prior felony conviction for embezzlement** is considered conduct **deemed unacceptable**. The individual would be permanently barred from receiving CFP® Certification.

Answer 88

**AOTC = $2,500** * **100% of the first $2,000 + 25% of the next $2000** * $2,500 available **per student** per year * **Qualified Expenses for AOTC**: Tuition and Fees, Course-Related Books, Supplies, and Equipment – Expenses required for a course, whether purchased from the school or elsewhere, Student Activity Fees – Only if they are required for enrollment. **Expenses That Do Not Qualify:** Room and board (housing and meals), Insurance, Medical expenses (including student health fees), Transportation, Non-required fees or equipment (e.g., optional software, sports/gym memberships). **LLC = $2,000** * **20% × Qualified Education Expenses ($10K minimum to get max)** ($5,000 x 20% = $1,000) * **Qualified expenses** include tuition and fees paid to an eligible institution, but **not room, board, or personal expenses.** * Only **one per year per family**

Answer 89

In a **community property state**, a surviving spouse will receive a **100% **step-up to the **full** FMV of the property. In this case, the wife’s new basis would be $160,000.

Answer 90

Per the CFP Board Procedural Rules, the DEC may issue a **suspension for a specified period**, not less than **90 calendar days** or greater than **five years**.

Answer 91

Under the provisions of the **Equal Credit Opportunity Act**, a potential borrower must receive a response from a creditor within **30 days** after an application indicating whether the request has been approved or denied.

Answer 92

**ANCHORING** When someone uses their **purchase price** as the value regardless of current information, **they are anchoring**.

Answer 93

**EFC %'s for STUDENTS** * Income = 50% * Assets = 20%

Answer 94

**EFC %'s for PARENTS** * Income = 22% - 47% * Assets = 5.64%

Answer 95

To qualify for a 529 ABLE plan there must b: 1. A diagnosis of a significant disability **prior to age 26** 2. With a condition expected to last **at least 12 consecutive months**. 3. In addition, the disabled individual must be **in receipt of benefits under SSI and/or SSDI** or able to **obtain a disability certification from a doctor**.

Answer 96

Withdrawals from parent-owned or dependent student-owned **529 plans** and parent-owned or third-party owned **Coverdell ESAs** are **not added back as income** on the student's financial aid application.

Answer 97

Distributions from student-owned **Coverdell ESA** account are **counted as income**. **Roth IRA** distributions **are considered income** on the FAFSA, as well.

Answer 98

Coverdell ESAs cover: * such as K-12 tuition * fees * supplies * equipment * tutoring (special needs) * room & board and transportation **COVERDELL GOOD FOR PRE-COLLEGE**

Answer 99

529 Plans cover: * $10,000 for K-12 tuition & expenses * College Tuition * fees, books, computers * equipment & supplies * tutoring (special needs) * room & board and transportation * Up to $10,000 annually in student loan payments

Answer 100

**WITNESSES** * No later than **30 calendar days after delivery of the Complaint or the filing of a Petition**, or by a time the DEC Chair otherwise specifies, each party must file a notice identifying all witnesses. * Witness List due no later than **60 days before the projected review date**.

Answer 101

According to the CFP Board Code of Ethics & Standards of Conduct document, any/all adverse conduct and bankruptcies need to be reported within **90 days** to the Client.

Answer 102

A **public censure is a written reproach** of Respondent that CFP Board publishes in accordance with Article 17.7 (General Provisions, Publication).

Answer 103

A Respondent must deliver a **written Answer to an Amended Complaint** no later than the later of **14 calendar days** of delivery of the **Amended Complaint** or the date an Answer to the original Complaint was due.

Answer 104

**Basis / Expected Payout = Tax-Free Portion of Annuitization Payment** * Exclusion allowance ends when all basis has been recovered. * Withdrawals have **LIFO tax treatment (earnings first)**. * Distributions subject to **early withdrawal 10% penalty prior to age 59 1/2** UNLESS they ANNUITIZE THE CONTRACT!.

Answer 105

* **Immediate** = Annuitant begins to **receive income distributions between 1 month and 1 year** from the date of purchase. * **Deferred** = Annuitant begins to **receive income distributions after 1 year** from the date of purchase. * **Deferred Income Annuity** = Annuitant begins to receive income distributions after 1 year from the date of purchase, but **can select a start date, often several years or decades after purchasing the annuity. Most insurers require payments to begin between 55 and 85 at the latest. AKA = Longevity Annuity intended to reduce longevity risk.**

Answer 106

**100% of the existing dwelling coverage** amount is used in the numerator of the equation.

Answer 107

The **most affordable** life insurance for younger individuals. Covers a **set time period** and promises to pay benefits only if the insured dies during the policy term.

Answer 108

Characterized by **long-term coverage, cash values, and high level premiums.** As the name implies, provides coverage for the whole of the insured's life.

Answer 109

Pairs lower costs of term and the cash value features of whole life. **Ability to adjust face amount and premium payments** (with additional underwriting) offers flexibility to the insured.

Answer 110

**Increased the opportunity for cash value fund to grow**, but with greater investment risk to the insured.

Answer 111

If the insured forgets to pay the premium or decides to end the contract, the grace period provides **31 days** to pay the premium without forfeiting any contractual rights and no questions asked.

Answer 112

**The extended-term non-forfeiture option** provides the largest death benefit because the original face amount of the policy is continued for a period determined by how long the policy cash value will pay for the coverage. A reduced paid-up non-forfeiture option provides a death benefit that is less than the original face amount of the policy.

Answer 113

**ANNUITIZATION** While some insurance companies may offer annuitization it is not one of the three standard non-forfeiture options.

Answer 114

**COBRA** generally requires that group health plans sponsored by employers with **20 or more employees in the prior year** offer employees and their families the opportunity for a temporary extension of health coverage (called continuation coverage) in certain instances where coverage under the plan would otherwise end.

Answer 115

**An annuity, five years certain** guarantees that the annuity will be paid out for five years. If the annuitant dies before the five-year period, **their successor beneficiary** will continue to receive the remaining payments.

Answer 116

An annuity purchased **prior to August 14, 1982**, uses **FIFO** based withdrawals. The $100,000 withdrawal is considered 100% return of basis and not subject to federal tax.

Answer 117

**Social Security disability**: After a **5-month waiting period**, Social Security will pay a disability benefit of **$1,000 for one month** this year. Because of Harold’s income **85% of the benefit, $850, is taxable at 22%**. The tax is $187, resulting in an after-tax benefit of $813 this year.

Answer 118

**Current Yield = Annual Coupon Payment ÷ Market Price** The Current Yield on Ophelia’s bond is calculated as follows: **$72.50 ÷ $1,086 = 6.68%**

Answer 119

Three years - returns during that time were 20%, -10%, and 5% respectively. What is geometric mean return? N = 3 PV = -1 FV = (1 + 0.2)(1 - 0.1)(1 + 0.05) = (1.20)(0.90)(1.05) = 1.134 Solve for I/YR = 4.2808, or, 4.28%

Answer 120

**Short the commodity, long the future.** Anyone who is short needs a long hedge, which is accomplished by buying a futures contract.

Answer 121

**Weak** form belief asserts that fundamental analysis and access to inside information would provide an advantage to the investor.

Answer 122

**Semi-Strong** form belief asserts that only access to inside information would provide an advantage to the investor.

Answer 123

By definition, **naked call writing bears unlimited risk**.

Answer 124

Mutual fund custodians prefer to report cost basis information using **the average cost method**.

Answer 125

If the home is transferred to a taxpayer as a result of a divorce, the time that the divorced spouse owned the home is **added to** the taxpayer’s period of ownership when calculating qualifying eligibility for a Section 121 exclusion.

Answer 126

**AMT Deferral Items** may include: * 1987 and subsequent-year depreciation based on ADS * Amortization of circulation, research and experimental costs * Amortization of mining exploration and development costs * Amortization of pollution control costs for facilities placed in service after 1986 * Use of percentage completion for long-term contracts entered after February 28, 1986 * Installment-sale adjustments * Gain or loss adjustments on the disposition of business property * Incentive stock options * Passive activity loss limitation * AMT net operating loss

Answer 127

**Negligence**: Deficiency of tax liability if there was no intent to defraud. A **20% penalty** will apply to the amount of the deficiency.

Answer 128

When the aggregate value of all foreign financial accounts (FFA) exceeds $10,000 at any time during the calendar year reported, an FinCEN (**Form 114**) must be submitted.

Answer 129

A performing artist is permitted to deduct business expenses in 2024 if: * Performing arts services for two or more employers * $200+ received from each * Expenses exceed 10% of gross income received * AGI < $16,000

Answer 130

Because a **whole life insurance** policy’s premium is guaranteed for life, this type of policy **initially provides the least amount of face amount death benefit** at the policy onset.

Answer 131

Variable Universal Life Insurance

Answer 132

In a **community property state**, a surviving spouse will receive a **100% step-up** to the full FMV of the property.

Answer 133

When a person **dies without a wil**l, they are said to have died **intestate**. In such cases, the distribution of their estate is handled according to the **intestacy laws of their state** or country, which typically **prioritize spouses, children, and other close relatives**. If no eligible relatives can be found, the estate **may eventually go to the government**.

Answer 134

**Withdrawals** from an **annuity** are typically reported on IRS **Form 1099-R**. This form is used to report distributions from **pensions, annuities, retirement plans, IRAs**, and other similar accounts.

Answer 135

A **Profit-Sharing Plan** is the **only qualified plan** that may invest **100% in employer stock**. Since a **401K Plan** is technically a Profit-Sharing Plan, the **Employer (ER)** can make their contribution **100% in employer stock**.

Answer 136

A **Money Purchase Pension Plan** and a **Target Benefit Pension Plan** can only invest **10% in employer stock**.

Answer 137

**0% of employer stock** is invested in **Defined Benefit Pension (DB) Plans** (Traditional DB Plan and Cash Balance Pension Plans)

Answer 138

A **Coverdell Education Savings Account (CESA)** can be used to pay for **NON-TUITION K-12 Expenses**. A **529 Plan** can only be used to pay for **K-12 TUITION ONLY**.

Answer 139

**Self-Cancelling Installment Note (SCIN)**: **Partially or fully cancels** the installment note before the note matures (at death)

Answer 140

**Private Annuity**: A seller receives a **fixed annuity income stream for life** and **removes the business/property from their gross estate**.

Answer 141

**Installment Sale**: Used to sell the business to a family member **or a 3rd party** and provide the seller with **secured income**.

Answer 142

* The **measure of risk** in the **Capital Market Line (CML)** is the **standard deviation of returns (total risk)**. * The **risk measure** in the **Security Market Line (SML)** is** systematic risk or Beta**. * The **Capital Asset Pricing Model (CAPM)** and the **Treynor Ratio** also include **systematic risk, or Beta**.

Answer 143

**All felony charges and convictions** must be reported by **written notice** to CFP Board **within 30 calendar days**. **EXCEPT first offence misdemeanor drug charges**, it would need to be a second (or more) offence.

Answer 144

**Withdrawals** from a Section **457(b)** plan **prior to age 59½** are **not subject to a 10% early withdrawal penalty tax**.

Answer 145

**Material changes** and updates to **public disciplinary history** or **bankruptcy** information must be **disclosed to the Client within ninety (90) days**, together with the location(s) of the relevant webpages.

Answer 146

A **contingent beneficiary** has a **distinct interest** in the policy **only if the primary beneficiary predeceases the insured**.

Answer 147

**Part E** of a homeowners insurance policy covers **legal action brought against the homeowner related to an accident** that a visitor experiences in the insured’s home. Remember **“Part E is for Exposure to Legal Action.”**

Answer 148

**Losses are deductible** for members of a **partnership** to the extent of their **tax basis in the partnership**.

Answer 149

A **Federal Supplemental Educational Opportunity Grant (FSEOG)** is for **undergraduates** with **exceptional financial need**. There is no guarantee every eligible student will be able to receive an FSEOG. Students at each school may be awarded an FSEOG based on the availability of funds at that school - Therefor it is **not available at allschools**.

Answer 150

When the CFP® professional has **responsibilities for monitoring and updating**, the CFP® professional must **communicate to the Client**: * The **Client’s responsibility to inform** the CFP® professional of any **Material changes to the Client’s qualitative and quantitative information**; * The **CFP® professional’s responsibility** to **update the Financial Planning recommendations**

Answer 151

An **interim suspension** is a suspension of a CFP® professional’s Certification and Trademark License **during the pendency of proceedings**. An Order of Interim Suspension is a **temporary sanction** and **does not preclude CFP Board from imposing a final sanction**.

Answer 152

**Legal fees** and **commissions** on the purchase of property **increase and are included in the cost basis**.

Answer 153

When **net investment income is $1,000 or less** on loans between **$10,000 - $100,000**, there is **no imputed interest.**

Answer 154

Commissions paid to buy a stock increase cost basis.

Answer 155

**Dividends on participating life insurance policies may be:** * Taken in cash. * Used to pay a portion of the next premium. * Left to accumulate interest. * Used to purchase single-premium, **paid-up additions**. * Used to purchase **one-year term insurance **(fifth dividend option).

Answer 156

Lump sum withdrawals of an annuity purchased **before August 14, 1982** are treated as **FIFO** based withdrawals. Lump sum withdrawals of annuties purchased after **August 14, 1982** are treated as **LIFO** based.

Answer 157

**Social Security disability** has a **5-month** waiting period.

Answer 158

Most term insurance policies include a convertible feature. This feature permits the policy owner to exchange the term policy for a **cash-value insurance contract**, without evidence of insurability such as Whole life insurance, Universal life insurance, or Variable life insurance. **NOT another Term-Life policy**.

Answer 159

Non-qualified HSA withdrawals prior to **age 65** are subject to a **20% penalty tax**.

Answer 160

A standard **HO-5** policy typically provides coverage for **contents at a limit of 50%** of the **Part A – Dwelling coverage limit**. Example: HO-5 coverage is $400,000, Part-A coverage is $200,000

Answer 161

The money market is a financial market. The primary and secondary markets are examples of capital markets.

Answer 162

Fiscal Policy is GOVERNMENT (FG) Monetary Policy is FED (MF)

Answer 163

When an ISO is bought and sold in the same year, and the transaction is categorized as a disqualifying disposition, the bargain element [(Exercise Price – Strike Price) x # of shares] will be taxed as **ordinary income, subject to FICA tax**.

Answer 164

Section 401(k) of the Internal Revenue Code allows a cash or deferred arrangement (CODA) to be added to a profit-sharing plan to allow participant elective deferrals into the plan.

Answer 165

Both parents and students are offered an Income Protection Allowance as they determine the EFC on the FAFSA form. The Asset Protection Allowance is only available to parents. It allows parents to exclude certain portions of their assets from consideration when calculating the Expected Family Contribution (EFC).

Answer 166

The Fair Credit **Billing Act** is a law that provides individuals with the right to have corrections made to **credit-related errors**.

Answer 167

According to the Code and Standards, the client is responsible for informing you of any material changes to their qualitative and quantitative information. You are responsible for communicating this responsibility to the client in Step 7 of the financial planning process.

Answer 168

The CFP Board Code of Ethics is comprised of six principles that must be upheld by CFP® professionals at all times. 1. Act with honesty, integrity, competence, and diligence. 2. Act in the client’s best interests. 3. Exercise due care. 4. Avoid or disclose and manage conflicts of interest. 5. Maintain the confidentiality and protect the privacy of client information. 6. Act in a manner that reflects positively on the financial planning profession and CFP® certification

Answer 169

Three categories of adverse conduct are identified in the Fitness Standards: I. Conduct that is unacceptable; **Individual is permanently barred from becoming certified.** II. Conduct that is presumed to be unacceptable. III. Other conduct that may reflect adversely upon the individual’s integrity or fitness, the profession, or the CFP® certification marks. Conduct that is presumed to be unacceptable and Other conduct that may reflect adversely upon the individual’s integrity or fitness, the profession, or the CFP® certification marks bars an individual from becoming certified **unless the individual petitions the Disciplinary and Ethics Commission (DEC)** and the DEC grants the petition or permits the individual to reapply for certification later. Conduct that is unacceptable; **Individual is permanently barred from becoming certified.**

Answer 170

Municipal Bond Interest Income is NOT INCLUDED in Net Investment Income for NII Tax

Answer 171

The additional Medicare tax is applied at a rate of 0.9% for income above $200,000 (single), $250,000 (MFJ), and $125,000 (MFS) - All on P. 3 of Tax Table

Answer 172

Real estate activities are generally considered to be passive. Taxpayers may deduct up to a $25,000 loss provided they “actively participate”. The $25,000 loss is allowed if the taxpayer's MAGI (AGI without the rental loss) is equal to or less than $100,000. The $25,000 loss limit, as well as the phase-out ranges of $100,000 to $150,000, are the same regardless of your filing status (single, MFJ, or HOH).

Answer 173

Penalty amounts for early withdrawal of CDs and time deposit accounts are available for deduction in the year of penalty only, not penalties from prior years.

Answer 174

Considered rental property if property use for persional for more than the greater of 14 days or 10% of the days rented.

Answer 175

If property is mixed use, to calculate deductible expenses for rental use: Add up personal and rentail days used, lets assume it was used a total of 120 days [95 (personal) + 25 (rental) = 120]. Divide rental days by total days used (25 / 120) = 20.83% of its use - multiple that times rental expenses.

Answer 176

A traditional rollover from the Section 401(k) account still held at a previous employer will require mandatory 20% withholding and if not rolled over properly taxed at marginal rate along with an additional 10% tax penalty.

Answer 177

The market that trades in short-term debt instruments is known as the money market.

Answer 178

Under SEC Rule 415, companies have up to three years to issue shares from their IPO filing. This allows for better timing of the issue.

Answer 179

According to the CFP Fitness Standards, Arbitrations and/or civil proceedings are categorized as **'Other Adverse Conduct.'**

Answer 180

According to the CFP Fitness Standards, Revocation of a financial license for non-administrative reasons and felony convictions for a financial-based crime are considered **'Unacceptable'** and **will always bar a candidate or person eligible for reinstatement from certification**.

Answer 181

According to the CFP Fitness Standards, RA felony conviction for **non-violent** crimes (including perjury) **within the last five years** is a **presumptive bar** from certification unless the individual petitions the Disciplinary and Ethics Commission (DEC) and the DEC grants the petition or permits the individual to reapply for certification later.

Answer 182

For 2024, a child’s standard deduction is the greater of $1,300 or their earned income plus $450 (not to exceed $14,600).

Answer 183

**All proceeds** of a viatical settlement are income tax-free for **terminally ill individuals**, irrespective of subsequent use.

Answer 184

**Only funds used for L/T care services** from proceeds of a viatical settlement are income tax-free for **chronically ill** individuals.

Answer 185

In a SIMPLE 401(k), the employer match cannot go below 3%.

Answer 186

In a like-kind exchange the recognized gain is the lesser of: realized gain, or net boot received.

Answer 187

Withdrawals from a SIMPLE IRA in the first two years of participation are subject to a 25% early withdrawal penalty tax.

Answer 188

If someone is over age 55 and separating from service with their employer, distributions from a Section 401(k) are not subject to early withdrawal penalty.

Answer 189

SIMPLE IRAs may be available to employees who have earned at least $5,000 in each of the past 2 years and are expected to earn $5,000 are eligible.

Answer 190

Failure to answer a complaint will result in CFP Board Counsel delivering an Administrative Order of Suspension or an Administrative Order of Revocation. There is a mandatory timeframe of 1 year and 1 day that is a part of the Administrative Order of Suspension.

Answer 191

The Duty of Care, which requires a CFP® professional to act with the care, skill, prudence, and diligence that a prudent professional would exercise in light of the Client’s goals, risk tolerance, objectives, and financial and personal circumstances.

Answer 192

College savings plans, Coverdell savings accounts and 529 accounts held in the parent’s or dependent child’s name are reported as parental assets on the financial aid application (FASFA).

Answer 193

In the Code and Standards, an engagement is defined as “an oral or written agreement, arrangement, or understanding.”

Answer 194

The federal estate tax is calculated in five steps: * Determining the value of the gross estate. * Arriving at the adjusted gross estate. * Determining the taxable estate. * Calculating the federal estate tax payable before credits. * Applying the allowable credits to arrive at the net federal estate tax.

Answer 195

SEP Eligibility Rules: Age 21 Worked for sponsor three of five prior years Minimum compensation $750 per year (2024) May exclude union members and non-resident aliens

Answer 196

A unique feature of a cash balance plan is that only a 3-year cliff vesting schedule may be used.

Answer 197

GDP formula is Y = C + I + G + (X – M) C is consumer spending I is investment made by industry G is government spending X-M is excess of exports over imports you may see this listed as ‘NE’ for Net Exports The GDP formula would be listed as C + I + G + NE

Answer 198

GDP is important because it Indicates the pace of growth or decline of the economy relative to history. Determines which sectors are over or under-performing. Can compare the size and growth rate of economies throughout the world.

Answer 199

Real GDP includes: Market value of all final goods and services produced within an economy. Income of foreigners working in the U.S. Profits that foreign companies earn in the U.S. Real GDP excludes: Imports Inflation Transactions where money changes hands but no new goods or services are produced Income of U.S. citizens working abroad Profits earned by U.S. companies in foreign countries

Answer 200

A Standby Trust is used to manage a person’s assets if they become incapacitated. There are 3 parties to the trust: Grantor: creates a trust by transferring the legal title of the property to the Trustee Trustee: manages the trust property for the beneficiary Beneficiary: has equitable title to trust property In a Standby Trust, the Grantor is the Trustee and Beneficiary. A Successor Trustee steps into the Trustee role when the Grantor is incapacitated.

Answer 201

A CFP® professional who has monitoring responsibilities must analyze, at **appropriate intervals**, the progress toward achieving the Client’s goals. The CFP® professional must review with the Client the results of the CFP® professional’s analysis.

Answer 202

When a CFP® professional is working as part of a team to provide Financial Advice to a Client, the Duty of Care requires the CFP® professional to communicate with the other members of the team about the scope of their respective services and the allocation of responsibility between them. This might be satisfied by a firm policy or protocol that identifies their respective responsibilities with respect to the services to be provided.

Answer 203

A maximum $2,500 deduction is available on student loan interest in 2024, subject to phaseouts.

Answer 204

For a contribution to a charity valued from $250 to $500, the only recordkeeping requirement is a donor letter.

Answer 205

A Section 125 Plan, also known as a Cafeteria Plan, is a pre-tax benefits plan that allows employees to choose from a variety of benefits while reducing their taxable income. These plans are governed by Section 125 of the Internal Revenue Code (IRC).

Answer 206

Excess 25% minus maximum disparity 5.7% = 19.3%

Answer 207

100% of health insurance premiums for self-employed individuals are deductible.

Answer 208

When contributing to donor-advised funds, donors are entitled to a charitable income tax deduction based on the type of property contributed, subject to AGI limitations. With charitable remainder trusts, pooled income funds, and charitable gift annuities, the available tax deduction is equal to the PV of the charity’s remainder interest.

Answer 209

With distributable net income (DNI), the beneficiary will be responsible for taxes on the lesser of the DNI allocation, or the amount required to be distributed according to the trust document. The beneficiary is responsible for paying taxes on the lesser of these figures.

Answer 210

To execute a will, you need testamentary capacity, or the will is invalid. This means that the will creator (i.e., testator) must know they are executing a will, must be aware of what assets they own, and must know and remember their relationship to their beneficiaries. The value of assets and liabilities is not required for testamentary capacity.

Answer 211

Per the CFP Board Procedural Rules, the DEC may issue a suspension for a specified period, not less than 90 calendar days or greater than five years.

Answer 212

The Consumer Credit Protection Act is a law that provides individuals with the right to know the costs and terms of their credit.

Answer 213

The employer basis of NUA stock held in an employer retirement account is recognized as ordinary income to the participant in the year of the distribution.

Answer 214

A nondurable power of attorney can be used if a principal needs the agent to complete a specific task on their behalf (e.g., signing a form while the agent is on vacation).

Answer 215

In an A-B trust arrangement, the surviving spouse has the right to all income and corpus from the A-trust and income if needed from the B-trust. Only the property from the A-trust is included in the surviving spouse’s estate.

Answer 216

The $3,000 capital loss per year can be claimed each year for Single, Head of Household, and MFJ. The maximum capital loss per year for Married Filing Separately is limited to $1,500. If a net capital loss is more than these limits, you can carry the loss forward, indefinitely, to later years.

Answer 217

A ‘Qualifying Disposition’ of ISOs occurs when the sale is at least two years from grant & one year from exercise.

Answer 218

TIP Gift Tax Consequences: The donor spouse cannot take a marital deduction for gifting TIP to the donee spouse. The donor spouse can take an annual exclusion for the present interest gift. Is TIP a gift? Yes Can the donor spouse gift-split? No Can the donor spouse take an annual exclusion? Yes Can the donor spouse take a marital deduction? No

Answer 219

Respondent must deliver to CFP Board Counsel a document acknowledging receipt of the Notice of Investigation within 14 calendar days from delivery to Respondent of the Notice of Investigation.

Answer 220

There is an interest rate risk to the seller in a transfer using a SCIN because the installment note interest is fixed for the term of the SCIN.

Answer 221

Withdrawals from a SIMPLE IRA in the first two years of participation are subject to a 25% early withdrawal penalty tax.

Answer 222

SIMPLE IRAs may be available to employees who have earned at least $5,000 in each of the past 2 years and are expected to earn $5,000 are eligible.

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