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CFP July 19th 2022 > Anything > Flashcards

Anything Flashcards

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1
Q

CRAPO

A 
Cash option
Reduce premiums
accumulate interest
paid up additions
One year term
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2
Q

IA 1940

A

IAs required to register with state or SEC

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3
Q

Exceptions to registration

A
  1. Banks and bank holding companies.
  2. B/D incidental to business.
  3. LATE
  4. publisher of newspaper/magazine
  5. advisers securities guaranteed by US
  6. Exempt SEC law

My editor was broke because was late to bank.

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4
Q

Exemptions to registration

A
  1. clients reside in their business but only on state securities
  2. advisers client are insurance
  3. advisers to venture capitalist’s
  4. adviseres to private funds less than 150MM
  5. foreign advisors with no place of business in U.S
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5
Q

dividend payout ratio

A

common stock dividend/EPS

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6
Q

GDS- Depreciation

A 
3 year tractors
5 years auto/computers/office equipment
7 year office furniture 
27.5 rental home
39business use
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7
Q

VVV Weathr FS

A

1.vandalism
2.vehicles
3volcano
4windstorm
5explosion
6aircraft
7theft
8hail
9riot
10fire
11smoke
12lightning

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8
Q

FAS-FWD

A 
falling objects
weight of ice snow
accidental over flow 
sudden busrting of applicances 
freezing system applicances
damag of eltrcial current
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9
Q

HO exclusions

A 
earthquakes/landslide
ordiance of law/demelition
floods/water damage
war/nuclear hazard
power failure
intentional act 
neglect
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10
Q

Medicare Part B does not cover

A 
Dental care/dentures
cosmetic surgery
hearing aids
eye exams
preventative visit and annual visits
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11
Q

Conversion Value of a Bond

A

PAR/Conversion price x Price of stock.

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12
Q

Coefficient of variation

A

SD/mean

lower CV=Better. Better risk adjusted return.

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13
Q

EAR

A

Effective annual rate

(1 + I/N) to the power of N -1

Use the Cal for this.

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14
Q

Price earnings ratio

A
  1. PE=stock/EPS
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15
Q

ROE

A

EPS/stockholders equity per share

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16
Q

ERs advantages qualified plans

A

ER contributions are tax deductible

ER contributions to the plan are not subject to payroll taxes

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17
Q

EE advantages to qualified plans

A

pre-tax contributions for EEs
ERISA protection
lump sum distribution options

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18
Q

who can make 401k plan?

A 
Corps
Partnerships
LLCs
Sole Pro
Tax-exempt entities
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19
Q

Relationship with Duration and

A

INverse relationship with Coupon/YTM which is INterests rates and duration.

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20
Q

Black scholes model

A 
1. Current price underlying asset
volatility underlying asset
time until expiration
risk free rate 
Strike price
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21
Q

Exception 10% EWP 401k MESS At DQ

A 
death
59 1/2
Disability 
Section 72t 
Medical expense exceed 7.5%
5k birth/adoption
QDRO
Public safety EE after 50
55 and separate from service
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22
Q

IRA 10% EWP Exception

A 
HIDE ME
First time home
Insurance health
DEath/disability 
Education Higher 
Medical expenses 
Equal periodic payments/72T.
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23
Q

Summary of Rental Property Exceptions to Passive Categorization

A
  1. Customer use less than or equal to 7 days
  2. Customer use less than or equal to 30 days and significant personal services provided
  3. Extraordinary personal services are provided
  4. Rental activities incidental to non-rental activity
  5. Rental activity available during business hours for nonexclusive use of customers
  6. Rental property used in an activity conducted by partnership, etc. where the taxpayer is the owner and an active participant
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24
Q

In general, the following items are not allowed when figuring an NOL.

A

· Any deduction for personal exemptions.

· Capital losses in excess of capital gains.

· The section 1202 exclusion.

· Nonbusiness deductions in excess of nonbusiness income.

· Net operating loss deduction.

· The domestic production activities deduction.

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25
Q

Memorize this card

A

The rules for age change depending on what is tax advantage is being asked for.
Qualifying for kiddie tax is under 19,
qualifying for child tax credit is under 18,
and qualifying for dependent care is under age 13.

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26
Q

dependent care credit

A

The taxpayer must provide over 1/2 cost of maintaining the household, which is also the principal residence of the child.

The child must be a dependent.

If married, both parents must work or go to school.

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27
Q

Increase in Donee’s Basis

A

(Appreciation of the Property/ Taxable Gift) × Gift Tax Paid

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28
Q

series EE savings bonds

A

The formula is a ratio utilizing the given information in the question fact pattern. She redeemed $5,000 worth of bonds, and used $3,000 of that for education so that’s the beginning of the formula 3,000 / 5,000. When EE government bonds are used for education, the interest is free of income taxes. Take the ratio calculated (3,000/5,000 = .60) times the $2,500 of gain, and that is the amount that is excluded from income.

Donna may exclude $1,500 of interest income from her gross income [($3,000 / $5,000) × $2,500 = $1,500]. Therefore, Donna must include $1,000 in her gross income ($2,500 - $1,500).

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29
Q

Dependency test

A

The five dependency tests are:

1) Gross Income Test,
2) Support Test,
3) Not a qualifying child,
4) Citizenship Test (U.S., Canada or Mexico), and
5) Joint Filing Test.

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30
Q

AMT Adjustment

A

Accelerated depreciation for property
Taxes
ISO Positive at exercise, negative at sale.
Standard deduction if not used is itemized

31
Q

Amt preference items Positive

A

Percentage depletion
intangible drilling costs
Interest on Private activity bonds

32
Q

HCE

A

5% owner this yr or last yr

comp excess 135k last yr.

33
Q

coefficient of variation

A

The lowest coefficient of variation (risk per unit of return) is the most attractive. The formula for coefficient of variation is standard deviation divided by expected return.

34
Q

Key EE

A

greater 5% owner
1% owner and 150k Comp.
Officer and Comp 200k.

35
Q

accuracy-related penalty

A

if he makes a substantial understatement of his tax liability, generally more than 10 percent of the correct tax liability and at least a $5,000 tax deficiency. The penalty imposed is generally 20% of underpayment amount.

36
Q

Qualified Dependent Test

A

The five elements of the Qualified Dependent Test are: Gross income, support, member of household or family, citizenship or residence, and joint return.

37
Q

Material participation

A

The rules for material participation are:

  1. More than 500 hours of participation
  2. Taxpayer is the only one who substantially participates
  3. Taxpayer spends greater than 100 hours in the tax year and no one else spends more
  4. Taxpayer has materially participated in any 5 of the previous 10 years
  5. The activity is a personal services activity and the individual has materially participated in any 3 prior years 6.

Taxpayer participates 100 or more hours in this activity and total participation in all such activities exceeds 500 hours A is incorrect because he would be a material participant.

The rule is > 100 hours and no one spends more. They can spend the same, but not more. (#3) B is incorrect because he is the only one who substantially participates (#2) C is incorrect because he needs to spend more than 500 hours or at least the same as the highest working person to be a material participant. (#1, #3) D is correct because he spent more than 500 hours (#1)

38
Q

Statue of limitations

A

The statute of limitations for the collection of a deficiency by the IRS is 10 years. There is no statute of limitations for fraud. The general statute of limitations under Section 6501 is 3 years. The statute of limitations for a substantial understatement of income greater than 25% is 6 years.

39
Q

Tax formula

A

Gross income
- Above the line deductions
= AGI
- Below the line deductions (standard deduction or itemized)
- Personal and dependency exemptions (after TCJA expires)
= Taxable Income
Calculate tax based on filing status (tax liability)
- Credits
+ Other taxes
- Prepayments
= refund or additional tax due

40
Q

Community Property

write it down

A 
Arizona
California
Idaho
Louisiana
Nevada
New Mexico
Texas
Washington
Wisconsin
41
Q

Imputed interest

A

0-10k=0.
10k-100k= lesser of NII or interest at applicable federal rate, if borrower less than 1k NII then 0.
over 100k= calc using Applicable federal rate.

42
Q

Gift tax liability

A

Exemption is 12,060,000
credit is 4,769,800
345,800 for 1st million.

43
Q

buisness small discounts

A

estate planning page 64

44
Q

Early retirement %. Memorize!

A

3 for age 65= 20%.
4 for age 66=25%
5 for age 67=30%

45
Q

Cash balance plan will always be a ___ Yr ____

A

3 Yr Cliff

46
Q

HEMS

A

health, education, maintenance, and support

47
Q

A BOP policy (business owners policy)

A

provides protection from liability claims and theft.

48
Q

Transfer for value exceptions

A 
to the insured 
business partner of insured 
partnership of insured 
corporation of insured 
carryover basis from transferor to transferee
49
Q

Deductions FOR AGI ABOVE

A 
SE business expense 
Contribute to IRA
Student loan %
Moving expenses Military 
SE health care insurance deduction 
SE retirement plans 
1/2 SE tax 
alimony payments
50
Q

Deductions FROM AGI BELOW

A

Medical/dental above 7.5%
SALT Taxes/ real estate/property/foreign taxes
Interest personal residence
personal residence acquisition now $750/ equity $100 improve home deducted.
investment interest expense. Margin expenses etc…
charitable AGI
Casualty $100 floor. Business/Federal/Estate. Personal suspended
MISC expenses subject to 2% floor no longer. planning fees. Can deduct gambling/annuity misc expense.

51
Q

Credits

A 
Earned income credit 
child dependent care credit -3k/6k limited to 20-35% most likely 20% above 43k for exam. 
child tax credit 2k per child under 17
qualifying relative $500
AOTC/LLC. - 4yrs/Life. 
Foreign tax credit
Credit for elderly disabled 
adoption credit. phase out
52
Q

Cost basis includes

A

Sales tax
freight
installation
testing

53
Q

SSN Reduction

A

5 years early=30%
4 years early=25%
3 years early=20%

54
Q

Admin secondary sources of law

A

-Regulation
-revenue rulings
revenue proceedings
private letter rulings
determination letters
technical advice memorandums

55
Q

Roth Triggers

A

Death
Disability
59 1/2
First time home buy 10k.

56
Q

Defined benefit plan vesting

A

Non-top heavy 3 to 7 graduated or 5 yr cliff.

Top heavy= 2 to 6 graduated or 3 yr cliff.

57
Q

IRA Penalty exceptions

A 
59 1/2
death
disability 
first time home buyer 
72t
tax levy
medical expense above 7.5% AGI 
Medical insurance premiums if unemployed
Higher education expense 
birth/legal adoption
58
Q

Material participation

A

more than 500 hours or 100 hours but most of nay investor
only participant
provides personal services

59
Q

1244 stock

A

OI Loss 100k MFJ. 50 S

60
Q

DCP vesting

A

2-6 yrs graded or 3 yr cliff

years of employment

61
Q

Annuity prior to 1982 =

A

FIFO

No penalty/no tax

62
Q

403b

A

A 403(b) plan may be adopted by an employer that is a tax-exempt organization or that is a public school system. Organizations that are wholly owned by a state or local government are usually not eligible employers, but a state hospital organized as a separate 501(c)(3) organization will be eligible. Also eligible is an agency of a state that is part of a public school system and an educational organization, such as a college or private school.

63
Q

own occupation

A

Own occupation is the most generous type of coverage because the definition is the most stringent. If the insured does not fit the very narrowly defined specifics of his or her occupation, then the insured can collect benefits and continue to work in another area if need be. Therefore, collecting disability and a salary. For example, a surgeon injures their hand, cannot perform surgery, but can teach at a local college in their medical program.

Any occupation is the most restrictive type of coverage because the insured will receive no benefits if he or she can hold any job. Sarah’s disability policy only pays 50% of her monthly gross salary. Since the premium payments are split between Sarah and the employer, benefits would not be 100% income-tax-free.

64
Q

HSA

A

After age 65, distributions that are not for qualified medical expenses are subject to income tax, but are not subject to the 20% penalty. Distributions for qualified medical expenses are not subject to income tax or penalty.

65
Q

confirmation bias

A

confirmation bias uses other’s information that supports their own position

66
Q

SML

A

The SML shows the relationship between risk and return for a particular asset, whereas the CML shows that relationship for efficient portfolios of assets.

In the SML, risk is measured by the beta coefficient; whereas in the CML, risk is measured by the standard deviation.

SML=CAPM=Beta

67
Q

SS taxation

A

Generally, for a taxpayer who files a joint return and whose “combined income” (AGI + foreign income + tax exempt income + ½ of Social Security benefits) is above $32,000, up to 50% of Social Security benefits are included in income. If a MFJ taxpayer’s combined income exceeds $44,000, up to 85% of Social Security benefits may be subject to taxation.

68
Q

Qtip

A

A QTIP election for the trust will help to reduce federal estate taxes for Jill’s estate. The QTIP election preserves the marital deduction for the trust and will defer estate taxes to Samuel’s estate. A QTIP election for only a portion of the trust will help to reduce overall estate taxes on Samuel’s and Jill’s estates because, then, Jill’s estate can make use of the applicable unified credit.

69
Q

ADR

A

ADRs provide an opportunity for Americans to purchase foreign securities.

70
Q

dependent test

A

relationship, abode, age and support

Addison meets the abode test because she lived with her mom for 5 month before a qualifying event (school) caused her to move.

hild is living with and is supported by Addison’s mother.

Income is not a criteria for a qualifying child, support is, and as long as the mother is supporting Addison with a place to live and paying for more than half of her expenses, she meets the test.

71
Q

100/300/25 insurance split

A

The $300,000 limit is the maximum the insurer will pay for all bodily injuries in an accident, regardless of how many are injured.

The $25,000 limit is the maximum the insurer will pay for property damage
The defense costs are covered in addition to the policy’s limits. $300,000 + $25,000 + $18,000 = $343,000

72
Q

skewness and kurtosis.

A

Investors generally are risk averse and will prefer positive skewness to negative skewness.

Investors generally prefer low kurtosis to high kurtosis. High kurtosis means that there is increased probability of both upside and downside returns. While the two are balanced out, investors react more to the increased downside potential and prefer to avoid such increased downside risk.

73
Q

Immunization

A

Immunization occurs when the portfolio’s duration, not its term to maturity, coincides with the investor’s need for the funds from the portfolio.

CFP July 19th 2022 (1 decks)

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