Anything Flashcards
CRAPO
Cash option Reduce premiums accumulate interest paid up additions One year term
IA 1940
IAs required to register with state or SEC
Exceptions to registration
- Banks and bank holding companies.
- B/D incidental to business.
- LATE
- publisher of newspaper/magazine
- advisers securities guaranteed by US
- Exempt SEC law
My editor was broke because was late to bank.
Exemptions to registration
- clients reside in their business but only on state securities
- advisers client are insurance
- advisers to venture capitalist’s
- adviseres to private funds less than 150MM
- foreign advisors with no place of business in U.S
dividend payout ratio
common stock dividend/EPS
GDS- Depreciation
3 year tractors 5 years auto/computers/office equipment 7 year office furniture 27.5 rental home 39business use
VVV Weathr FS
1.vandalism
2.vehicles
3volcano
4windstorm
5explosion
6aircraft
7theft
8hail
9riot
10fire
11smoke
12lightning
FAS-FWD
falling objects weight of ice snow accidental over flow sudden busrting of applicances freezing system applicances damag of eltrcial current
HO exclusions
earthquakes/landslide ordiance of law/demelition floods/water damage war/nuclear hazard power failure intentional act neglect
Medicare Part B does not cover
Dental care/dentures cosmetic surgery hearing aids eye exams preventative visit and annual visits
Conversion Value of a Bond
PAR/Conversion price x Price of stock.
Coefficient of variation
SD/mean
lower CV=Better. Better risk adjusted return.
EAR
Effective annual rate
(1 + I/N) to the power of N -1
Use the Cal for this.
Price earnings ratio
- PE=stock/EPS
ROE
EPS/stockholders equity per share
ERs advantages qualified plans
ER contributions are tax deductible
ER contributions to the plan are not subject to payroll taxes
EE advantages to qualified plans
pre-tax contributions for EEs
ERISA protection
lump sum distribution options
who can make 401k plan?
Corps Partnerships LLCs Sole Pro Tax-exempt entities
Relationship with Duration and
INverse relationship with Coupon/YTM which is INterests rates and duration.
Black scholes model
1. Current price underlying asset volatility underlying asset time until expiration risk free rate Strike price
Exception 10% EWP 401k MESS At DQ
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
IRA 10% EWP Exception
HIDE ME First time home Insurance health DEath/disability Education Higher Medical expenses Equal periodic payments/72T.
Summary of Rental Property Exceptions to Passive Categorization
- Customer use less than or equal to 7 days
- Customer use less than or equal to 30 days and significant personal services provided
- Extraordinary personal services are provided
- Rental activities incidental to non-rental activity
- Rental activity available during business hours for nonexclusive use of customers
- Rental property used in an activity conducted by partnership, etc. where the taxpayer is the owner and an active participant
In general, the following items are not allowed when figuring an NOL.
· 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.
Memorize this card
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.
dependent care credit
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.
Increase in Donee’s Basis
(Appreciation of the Property/ Taxable Gift) × Gift Tax Paid
series EE savings bonds
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).
Dependency test
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.
AMT Adjustment
Accelerated depreciation for property
Taxes
ISO Positive at exercise, negative at sale.
Standard deduction if not used is itemized
Amt preference items Positive
Percentage depletion
intangible drilling costs
Interest on Private activity bonds
HCE
5% owner this yr or last yr
comp excess 135k last yr.
coefficient of variation
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.
Key EE
greater 5% owner
1% owner and 150k Comp.
Officer and Comp 200k.
accuracy-related penalty
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.
Qualified Dependent Test
The five elements of the Qualified Dependent Test are: Gross income, support, member of household or family, citizenship or residence, and joint return.
Material participation
The rules for material participation are:
- More than 500 hours of participation
- Taxpayer is the only one who substantially participates
- Taxpayer spends greater than 100 hours in the tax year and no one else spends more
- Taxpayer has materially participated in any 5 of the previous 10 years
- 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)
Statue of limitations
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.
Tax formula
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
Community Property
write it down
Arizona California Idaho Louisiana Nevada New Mexico Texas Washington Wisconsin
Imputed interest
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.
Gift tax liability
Exemption is 12,060,000
credit is 4,769,800
345,800 for 1st million.
buisness small discounts
estate planning page 64
Early retirement %. Memorize!
3 for age 65= 20%.
4 for age 66=25%
5 for age 67=30%
Cash balance plan will always be a ___ Yr ____
3 Yr Cliff
HEMS
health, education, maintenance, and support
A BOP policy (business owners policy)
provides protection from liability claims and theft.
Transfer for value exceptions
to the insured business partner of insured partnership of insured corporation of insured carryover basis from transferor to transferee
Deductions FOR AGI ABOVE
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
Deductions FROM AGI BELOW
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.
Credits
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
Cost basis includes
Sales tax
freight
installation
testing
SSN Reduction
5 years early=30%
4 years early=25%
3 years early=20%
Admin secondary sources of law
-Regulation
-revenue rulings
revenue proceedings
private letter rulings
determination letters
technical advice memorandums
Roth Triggers
Death
Disability
59 1/2
First time home buy 10k.
Defined benefit plan vesting
Non-top heavy 3 to 7 graduated or 5 yr cliff.
Top heavy= 2 to 6 graduated or 3 yr cliff.
IRA Penalty exceptions
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
Material participation
more than 500 hours or 100 hours but most of nay investor
only participant
provides personal services
1244 stock
OI Loss 100k MFJ. 50 S
DCP vesting
2-6 yrs graded or 3 yr cliff
years of employment
Annuity prior to 1982 =
FIFO
No penalty/no tax
403b
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.
own occupation
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.
HSA
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.
confirmation bias
confirmation bias uses other’s information that supports their own position
SML
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
SS taxation
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.
Qtip
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.
ADR
ADRs provide an opportunity for Americans to purchase foreign securities.
dependent test
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.
100/300/25 insurance split
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
skewness and kurtosis.
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.
Immunization
Immunization occurs when the portfolio’s duration, not its term to maturity, coincides with the investor’s need for the funds from the portfolio.
