4/19/2023

Question 1

No more than 60% of investment companies Board Members can be What?

Answer 1

Affiliate’s
(they cant be employed by the company or own 10% ownership or more)
(they would all probably vote exactly the same)

Question 2

how many of investment companies’ board seats can be filled by Affiliates?

Answer 2

up to 60%

Question 3

DPP

Answer 3

Direct Participation Program

Type of Limited Partnership

Min of $250k to enter (high buy in price)

VERY illiquid

only allows a MAX 25 non accredited investors into the DPP

Question 4

Only entities that CAN pass through losses to the investor

Answer 4

DPP’s and Partnerships

Different than passing through liability (only general partnerships pass through liability)

Question 5

What’s the difference between passing through
Losses
and passing through
Liability
to the investor

Answer 5

Losses - Losses in the Fund (unlike other investments that pay dividends or dont, passing Gains and Losses through means they dont pay you a dividend but literally send your % of income or Losses directly to you)

Liability - if entity is sued can they come after the investors other stuff (ie: home, car, boat, etc…)

Question 6

General partnership VS Limited Partnership

in relation to Losses
and Liability

Answer 6

Losses:
Gen partner= Pass through to investor
Limited partner = Pass through to investor

Liability:
Gen partner= Pass through to investor
Limited partner = DONT Pass through to investor

Question 7

Investment Companies owning voting % of another investment company

Answer 7

Can only own 3% of voting rights of another investment company

Question 8

Minimum Public Offering Amount for Investment Companies

Answer 8

$100K

Question 9

Can Investment Companies Leverage or Buy On Margin?

Answer 9

Leverage - Yes

Buy on Margin - NO

Question 10

Difference between Buying on Margin and Leveraging

Answer 10

Buying on margin - Borrowing money and putting a portion of yours down when buying securities
Some is your $ and some is their $

Leveraging - Borrowing money and doing whatever you want with it. (Its all yours but you have to pay it back eventually)
All of it is your $ but you owe them $ back

Question 11

Length of time it takes for an Investment company to redeem shares

Answer 11

Is regulated by the Investment Company Act of 1940

they have 7 days MAX to redeem your shares
(when you want to cash out)

Question 12

CAPM

Answer 12

Capital Asset Pricing Model

Maximizing the return you get for the level of risk you are taking

You want your return to be as close to the efficient frontier as possible (where risk = return)

“for this amount of risk we should be getting this much reward”

Question 13

Efficient Frontier

Answer 13

Part of CAPM

its where risk is equal to reward

you want your investment to be as close to the efficient frontier as possible

Question 14

Efficient Market Hypothesis

Answer 14

Strong - Pubilc and Private Info is Reflected in stock price

Semi-Strong - Public info is reflected in stock price but not private
AND when private become public info it IMMEDIATELY reflects in the stock price

weak - Public info is reflected in stock price but not private
AND when private becomes public info it reflects in the stock price AFTER it is analyzed

Question 15

Strategic Asset Allocation

Answer 15

Shoots for a certain split (ie: 60/40) and rarely changes from it

rebalances every quarter

Passively Managed

Question 16

Tactical Asset Allocation

Answer 16

Has a split (ie: 60/40) but it frequently changed

rebalances Frequntly based on current Economic and Fundamental information

Activly Managed

Question 17

Difference between Long and Short Term Capital Gains

Answer 17

Long Term - Security was held for longer than 1 year
Taxed as Long Term Capital Gains

Short Term - Security was held for less than 1 year
Taxed as Ordinary Income

Question 18

How much can you deduct in losses every year in Ordinary Income

Answer 18

find net Long term gains
find net Short Term Gains
Add the 2 together

If result is positive => pay ordinary income tax on short term and Long Term Capital Gains on the Long Term Gains

If result in negative =>

$3K Max /year

If you took a loss bigger than that you can carry it over into new years and deduct it from any gains in those years or add it to any new losses in those years

Question 19

Difference Between Qualified and NQ Dividends

Answer 19

Qualified - Dividend was payed from Net Earnings of that year
TAXED AS LONG TERM CAPITAL GAINS

NQ - Dividend was payed from retained Earnings (earnings of previous years that wasnt paid in a dividend or spent by the company)
TAXED AS ORDINARY INCOME

Question 20

Another name for Non-Qualified Dividends

Answer 20

Special Dividends

Question 21

AGI

Answer 21

Adjusted Gross Income

Gross income - Write Offs

Question 22

AMT

Answer 22

Alternatve minnimum tax

Takes away some of the write offs from AIG

individuals paytaxes on AIG or AMT which ever is higher

Question 23

Max Write Off for Gifted Money

Answer 23

$15k - if your single
$30k - if you are married

(Write off usually for the giver NOT the receiver)

Question 24

How do taxes work on Inherited or Gifted assets?

Answer 24

you determine the cost basis

once you sell those securities you pay short/long-term gains from that new cost basis

gifting:
cost basis => whatever the cost basis was for the donor (no step up in cost basis)

Inheriting:
Cost Basis => whatever the cost basis was once they passed away (called a step up in cost basis)
(step up in cost basis happens because the individuals estate pay estate taxes on that money before its ever given to you)

IF SECURITIES ARE SOLD WITHIN 1 YEAR OF RECEIVING IT:
If the value is less now that the donor’s original cost basis
then the cost basis is either when you received it or when their old cost basis whichever favors you most

Question 25

What do you need to know about Trust’s and Taxes

Answer 25

Trusts DONT pass through taxes onto the beneficiary

they pay it themselves

they have a progressive tax system
(like the ordinary marginal income tax bracket the more you make the higher % you have to pay)

(this is speaking only about Federal Taxes Not state. every state has their own rules)

Question 26

if you receive a $ gift do you have to pay taxes on it

Answer 26

No, if its under 17k

if over 17k you have to pay Gift Taxes

(the giver doesn’t get a write-off for gifting it to you though)