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Series 7 > 1: TYPES OF ACCOUNTS (221) > Flashcards

1: TYPES OF ACCOUNTS (221) Flashcards

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Series 7 Top-off Exam flashcards
1
Q

Would a bank employee who only sells fixed annuities probably be able to open an account at a FINRA member firm without notifying or receiving permission from her employer?

A

Yes, probably

Someone selling fixed annuities only (not a security like variable annuities) is most likely not associated with a member.

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2
Q

Would a muni bond be a good investment for a qualified account plan?

A

No

Muni bonds provide tax-exempt interest payments so they offer lower yields. Because earnings in a qualified retirement account grow tax deferred, the muni bond is a shitty investment.

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3
Q

Define: specified adult

A

65+
or
18+ who probably has an impairment

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4
Q

T/F: Contributions to Roth IRAs are made with after-tax dollars

A

True

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5
Q

Do you pay taxes up front with a Roth IRA

A

Yes

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6
Q

T/F: You pay taxes when you put money into a Roth IRA

A

True

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7
Q

T/F: In a Roth IRA, you can withdraw your contributions at any time, for any reason, without tax or penalty.

A

True

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8
Q

Are distributions from a Roth IRA taxed?

A

No, distributions are received tax free

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9
Q

Who would use a 403(b) plan?

A

Employees of nonprofit organizations (such as hospitals and schools)

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10
Q

Does the beneficiary need to be related to the contributor in a Coverdell Education Savings Account (ESA)?

A

No

The beneficiary need not be related to the contributor(s)

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11
Q

Are fixed annuities a security?

A

No

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12
Q

Are variable annuities a security?

A

Yes

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13
Q

Max contribution to any one beneficiary in a Coverdell Education Savings Account (ESA)

A

The maximum contribution permitted for any beneficiary is $2,000 per year

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14
Q

Can balances in a Coverdell Education Savings Account (ESA) be used for purposes other than education?

A

No

Account balances may be used for education only.

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15
Q

T/F: IRAs can be opened as margin accounts

A

False

IRAs can only be cash accounts

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16
Q

Can you get tax free distributions on a Roth IRA if you satisfy the holding period

A

Yes

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17
Q

Distributions on a Roth IRA are tax free if the account holder is at least ____ years old, and has had the account for at least ___ years

A

59.5 years old

Held account for 5 years

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18
Q

Is an officer of a Bd considered an employee?

A

Yes

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19
Q

Do C corps provide favorable tax treatment of gains or losses?

A

No

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20
Q

Could an Indian citizen own an S Corp?

A

No

only U.S. citizens or resident aliens can own an S Corp

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21
Q

T/F: Contributions to a Coverdell ESA are made with after-tax dollars.

A

True

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22
Q

T/F: In a. Oversell education savings account, distributions used for qualified educational expenses are tax free.

A

True

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23
Q

Are commodities permitted in Keogh plans?

A

No

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24
Q

Are precious metals permitted in Keogh plans

A

No

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25
Q

Are uncovered options allowed in Keogh plans?

A

No

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26
Q

Is OFAC for terrorists?

A

Yes

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27
Q

T/F: Not all financial institutions are required by federal law to maintain a customer identification program and check the identifying information against a list maintained by the OFAC

A

False

All financial institutions have to

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28
Q

How often can you roll over an IRA w/o getting a penalty

A

Annually

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29
Q

What makes a pattern day trader

A

four or more day trades in a five-business-day period.

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30
Q

Are deferred compensation plans qualified?

A

No

They are non qualified

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31
Q

T/F: Under most circumstances, the annual contribution to a SEP IRA will be higher than those allowed for education savings accounts or traditional or Roth IRAs.

A

True

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32
Q

T/F: There is no penalty is charged for failing to withdraw funds after age 72 on a traditional IRA

A

False

RMDs start at 72

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33
Q

Would you have to ask an applying customer to a brokerage if she has a brokerage account at another broker-dealer?

A

No

Info not required

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34
Q

If a broker-dealer reserves the right to disclose nonpublic personal information to third nonaffiliated parties, it must notify the customer at the time of the account opening, then how often offer that

A

Annually

Give notice at account opening, then every year

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35
Q

Can someone under the age of 21 participate in a company’s qualified retirement plan?

A

No

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36
Q

T/F: The most beneficial corporate pension plan for a younger employee would be the defined contribution plan. The employee has many years in the workforce, so the investments made with the defined contributions will have a maximum amount of time to grow.

A

True

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37
Q

Would community property laws be applicable to two cousins with a joint account?

A

No
Community property laws in jurisdictions presuming that type of ownership designation only applies to marital property (property acquired by the two individuals while married). Therefore, community property laws would not be applicable to siblings.

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38
Q

Can deferred compensation plans be discriminatory?

A

Yes

Deferred compensation plans are not qualified plans and may be discriminatory

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39
Q

Are deferred compensation plans qualified plans?

A

No

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40
Q

Does aSEP IRA have high annual contributions?

A

Yes

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41
Q

Regulation BI uses the phrase ______ to determine when something is a recommendation

A

Regulation BI uses the phrase “a call to action” to describe the essence of a recommendation

RR has to actually recommend an action to take

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42
Q

Are contribution limits the same in a traditional and Roth IRA?

A

Yes

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43
Q

Do Roth IRAs have RMDs?

A

No

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44
Q

Do traditional IRAs have RMDs?

A

Yes

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45
Q

Can you move money from one person’s individual account into another persons individual account if you have both their permission?

A

If you get authoirzation from both, yes you can

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46
Q

Are uncovered call options okay in a a qualified plan?

A

No

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47
Q

T/F: Contribution limits are different for traditional and Roth IRAs

A

False

contribution limits are the same for both

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48
Q

Can you contribute to an IRA after the first tax filing deadline (April 15) if you file an extension

A

No

You may contribute to an IRA only until the first tax filing deadline (April 15) even if you filed an extension.

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49
Q

Can contributions to an IRA made between Jan 1 and April 15 be used for:
the current year
the past year
or both?

A

Both

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50
Q

T/F: If you file your taxes on Jan 15, you can’t deduct an IRA contribution you’re going to make on April 15

A

False

If you file your taxes on January 15, you may deduct your IRA contribution even if it is not made until April 15.

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51
Q

T/F: you may contribute to this year’s IRA from January 1 of this year until April 15 of next year.

A

True

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52
Q

T/F: All corporate pension and profit-sharing plans must be set up under trust agreements.

A

True

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53
Q

In corporate pension plans and profit sharing plans, who assumes fiduciary responsibility for the plan?

A

The plan’s trustee

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54
Q

T/F: Prior written notification/consent is needed is an RR opens a 529 plan at another Brokerage

A

False

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55
Q

T/F: Prior written noticication/consent is needed if a clerical employee of a BD opens a margin account at another BD

A

True

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56
Q

3 Accounts you can open at another BD without prior written notification/consent

A
  1. 529 plans
  2. Mutual Funds
  3. Variable annuities
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57
Q

Do employers receive tax breaks for contributions to a qualified retirement plan?

A

Yes

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58
Q

Can employees defer part of their salary to make contributions to a qualified retirement plan?

A

Yes, in some cases

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59
Q

What is the point of an employee defering part of their salary to contribute to a qualified retirement plan?

A

It reduces their taxable income

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60
Q

2 types of qualified retirement plans

A

Defined conribution
and
Defined benefit

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61
Q

Do employees get a guarenteed payout when they retire or begin taking withdrawls on a defined benefit plan?

A

Yes

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62
Q

Are pensions a defined benefit plan

A

Yes

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63
Q

Who is responsible for all of the planning and investment risk of a defined benefit plan

A

The EPMPLOYER is responsible

64
Q

Are pensions a defined-contribution plan?

A

No pensions are a defined benefit plan

65
Q

Are 401(k)s a defined-benefit plan?

A

No, 401(k)s are a defined contribution plan

66
Q

What’s the most basic difference between qualified retirement plans and non-qualified ones?

A

Qualified meets ERISA quidelines

Non-qualified falls outside of ERISA guidelines

67
Q

Are deferred-compensation plans qualified or nonqualified?

A

Nonqualified

68
Q

Are 403(b) plans qualified plans?

A

Yes

69
Q

Are profit sharing plans qualified or non qualified plans?

A

Qualified

70
Q

Are executive bonus plans qualified plans?

A

No

71
Q

T/F: Split-dollar life insurance plans are qualified plans?

A

False

split-dollar life insurance plans are nonqualified

72
Q

T/F: In a profit sharing plan, the amount of the contribution depends on the employers profitability

A

True

73
Q

Is growth in qualified pension plans tax free?

A

No

Growth in qualified pension plans, as well as other qualified plans, is tax deferred, not tax free.

74
Q

Is growth on qualified plans tax deferred?

A

Yes

75
Q

Non discrimination rule

A

clause found in qualified retirement plans stating that all employees of a company must be eligible for the same benefits, no matter their position within the company.

76
Q

Can non qualified plans be discriminatory?

A

Yes

77
Q

Who are non qualified plans usually for?

A

Highly paid employees

78
Q

T/F: Contributions to a non qualified plan are usually deductible to the employer

A

False

The contributions made to these types of plans are usually nondeductible to the employer and taxable to the employee.

79
Q

Are contributions to a non-qualified plan taxable to the employee?

A

Yes

80
Q

What is the point of employees deferring taxes until retirement in a non qualified plan?

A

They’re usually in a lower tax bracket

81
Q

What type of account allows for the irrevocable transfer of almost any kind of asset, including works of art and real estate, for the benefit of a minor?

A

UTMA
UTMA can have almost any asseT
“T” for UTMA

82
Q

Do earnings in a qualified retirement plan grow tax deferred

A

Yes

83
Q

Do contribution amounts vary in an employer-sponsored defined benefit plan?

A

Yes

84
Q

Which has RMDs: traditional or Roth IRA

A

Traditional has RMDs

85
Q

T/F: Growth in a qualified pension plan is tax tax free income

A

False

Growth in qualified pension plans, as well as other qualified plans, is tax deferred, not tax free.

86
Q

T/F: Growth in a qualified pension plan is taxable at the time of distribution

A

True

87
Q

T/F: Roth IRAs have greater contribution limits than traditional IRAs

A

False

both traditional and Roth IRAs is that contribution limits are identical.

88
Q

Are earnings from a non deductible contribution in a traditional IRA tax deferred?

A

Yes
All earnings, whether from deductible or nondeductible contributions, are tax deferred & all earnings are taxable as ordinary income upon withdrawal

89
Q

Are earnings from a non deductible contribution to a traditional IRA taxed as ordinary income upon withdrawal?

A

Yes
All earnings, whether from deductible or nondeductible contributions, are tax deferred. Therefore, all earnings are taxable as ordinary income upon withdrawal

90
Q

Defined benefit plans are aka as ____

A

Pension plans

91
Q

Regulation BI stands for _____

A

Best interest

92
Q

Does Regulation BI apply to account reccomendations?

A

Yes

93
Q

When can you no longer mame contributions to this year for an IRA

A

April 15 of the next year

even if you filed an extension

94
Q

Is growth in qualified pension plans tax free or tax deferred?

A

Growth in qualified pension plans is tax deferred not tax free

95
Q

Does a qualified pension plan have to comply with nondiscrimination rules?

A

Yes

96
Q

Are UTMA and UTGMA custodial accounts?

A

Yes

97
Q

Qualified withdrawls from a section 529 plan include payments of interest on student loans up to a lifetime maximum of $_____ per child.

A

$10k

98
Q

Is an actuary needed for a defined benefit plan?

A

Yes, to see how much employers have to contribute to assure the payment of the benefit amount

99
Q

Is a actuary needed for a defined contribution plan?

A

No

100
Q

Can tennants in common own different percentages of the property?

A

Yes

101
Q

What happens to property in a TIC account upon death

A

It goes to that person’s estate

102
Q

In a TIC agreement, does a change of members break the original agreement

A

No

103
Q

What happens if someone dies in a joint tenancy account

A

Property goes to the surviving owner

104
Q

Does TIC have automatic rights of survivorship?

A

No

105
Q

T/F: Not all parties on a JTWROS can enter orders

A

False

All parties can enter orders

106
Q

T/F: Limited power of attorney enables a nonaccount owner to enter trades and withdraw assets?

A

False

Limited power would only allow nonaccount owner to enter trades, not withdraw

107
Q

T/F: For anyone other than the account owner, entering trades and withdrawing assets requires a full power of attorney.

A

True

108
Q

T/F: a limited power of attorney would allow a non account owner to enter trades?

A

True

109
Q

UTMA accounts allow the custodian to use the funds for almost anything that is a benefit to the minor except what 3 things

A

parental obligations:

1) food
2) clothing
3) shelter

110
Q

T/F: the custodian of a UTMA account could use the funds for summer camp for the minor

A

True

111
Q

T/F: the custodian of a UTMA account could use the funds pay for the minor’s summer camp

A

True

112
Q

T/F: The custodian of a UTMA account could use the funds to pay for clothes for the child

A

False,

Food, shelter, and clothing are considered parental obligations so they can’t use the funds for that

113
Q

T/F: Parents can use frunds from a UTMA account for almost anything that is a benefit to the minor

A

True

114
Q

T/F: Assets from any qualified corporate plan may be rolled over into an IRA

A

True

115
Q

Would a RR be a fiduciary if he gets discretionary acuthorization from a slcient?

A

yes

116
Q

If a rep sits on the board of directors for a charity, does that classify him as a fiduciary?

A

Yes

117
Q

Joint accounts are aka as ____

A

Tenants in common (TIC)

118
Q

T/F: In a TIC account, each party must specify a percentage of interest in the account.

A

Tru

119
Q

Does all income/loss flow through to owners of an S corp

A

Yes

120
Q

Do income/losses flow through to owners in a GP

A

Yes

121
Q

Is income and losses flowed through to owners of a LP

A

Yes

122
Q

Do S corps get doubule taxed?

A

No

all income/loss passes through to the owners

123
Q

Would a GP get double taxed?

A

No

since all it’s income/loss is passed to the owners

124
Q

T/F: with C corps, corporate earnings are taxed once at the business level but avoid taxation when the earnings are paid to shareholders as dividends

A

False

Earnings are taxed both at the business level and when paid to shareholders as dividends

125
Q

Are executors of an estate considered a fiduciary?

A

Yes

126
Q

Does being a board member of a foundation make an RR count as a fiduciary?

A

Yes

127
Q

In a traditional IRA, is the principal of a non deductible contribution tax free upon qualified withdrawn?

A

Yes

The principal is tax free but the rest of the balance in the account is taxable as ordinary income

128
Q

T/F: All earnings in a traditional IRA, whether from deductible or nondeductible contributions, are tax deferred.

A

True

129
Q

Are tax free bonds considered a good investment for a traditional IRA?

A

No

The tax free benefit is lost

130
Q

If something is tax deferred is it probably taxable upon withdrawal?

A

Yes

131
Q

In a minors custodial account, who has the authority to make the trading decisions, the minor or the custodian?

A

The custodian

132
Q

Is a minor custodial account who is the beneficial owner, the minor or the custodian?

A

The minor is the beneficial owner

133
Q

Defined benefit plans are also known as what?

A

Pension plans or qualified benefit plans

134
Q

What is a qualified retirement plan

A

A qualified retirement plan is a retirement plan recognized by the IRS where investment income accumulates tax-deferred

135
Q

Is income tax deferred in a qualified plan

A

Yes

136
Q

Who makes the trading decisions in a minors custodial account

A

The custodian not the minor

137
Q

Are variable annuities tax deferred?

A

Yes

138
Q

Does a C Corp allow flow-through of business income and losses directly to shareholders in order to avoid double taxation

A

No

139
Q

When do min distrubutions for a traditional RIA begin

A

By April 1 of the year after the owner turns 72

140
Q

T/F: RMD for a traditional IRA must begin when the owner turns 72

A

False

RMDs must begin by April 1 of the year AFTER the owner turns 72

141
Q

If the daughter of an old client w/ declining cognitive abilities wants to have control over the account, what kind of power of attorney would you give her?

A

Durable power of attorney

142
Q

Does durable power of attorney survive death?

A

No

143
Q

Does a durable power of attorey survive the client becoming legally incompetent?

A

Yes

144
Q

If 3 ppl have a TIC account and one dies, who are now the 3 tennans in the account?

A

2 alive ppl and the deceased’s estate

145
Q

T/F: If two 3 ppl have a TIC account and one dies, the two survivors continue as cotenants with the deceased person’s estate

A

True

146
Q

Do ppl in a JTWROS acct have equal ownership?

A

Yes

147
Q

T/F: Tennants in a JTWROS account can have uneuqal interest in the account

A

False,

Tennants in JTWROS must have equal interest

148
Q

If you want to roll over an IRA, how long after you receive your distrubution do you have to roll it over into anothe IRA

A

60 days

149
Q

If moving funds to a differnt IRA, how long do you have to reinvest the money to avoid taxes and penalties

A

Must reinvest within 60 days

150
Q

If a customer opens a cash account, who are all the ppl that need to sign the new account form

A

Only the princiapl has to sign the form

151
Q

Buying power for day traders

A

4 times maintenance margin excess

152
Q

Maintenance margin excess is defined as equity in the account above ____

A

Above the 25% minimum requirement

153
Q

Keogh plan

A

Keogh plans are tax-deferred pension plans—either defined-benefit or defined-contribution—used for retirement purposes by either self-employed individuals or unincorporated businesses, while independent contractors cannot use a Keogh plan.
Profit-sharing plans are one of the two types of Keogh plans that allow a business to contribute up to 100% of compensation, or $58,000 as of 2021.
Keogh plans have more administrative burdens and higher upkeep costs than Simplified Employee Pension (SEP) or 401(k) plans, but the contribution limits are higher, making Keogh plans a popular option for many high-income business owners.
Because current tax retirement laws do not set apart incorporated and self-employed plan sponsors, the term “Keogh plan” is rarely ever used.

154
Q

Spousal IRA

A

If spouse has min or no earned income
Other souse can contribute up to indexed maximum to that spouse

> have to have 2 separate IRA
no such thing as joint IRA
must file joint tax return

155
Q

Sally Williams is a customer of your FINRA member firm. Sally was recently married and wishes to change the name on her individual account to her new last name. To do this,

A)
the name change must be authorized by a qualified registered principal designated by the member.
B)
Sally must close the old account and open a new one in the new name.
C)
the name change must be authorized by a court of competent jurisdiction.
D)
the name change must be authorized by Sally’s spouse.

A

A) name change must be authorized by registered principal of firm

Explanation
The name change requires approval of a designated principal of the member firm. The principal will want to see evidence of the change in status, such as a marriage certificate, before granting the approval.

LO 1.e

Series 7 (64 decks)

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