CFP General Principles Flashcards

Question

Calculate monthly mortgage payment

Answer 1

END mode PV = mortgage amount 12 P/YR N = years (x 12) I = rate solve for PMT

Answer 2

END mode 12 P/YR 30 Gold x P/YR = 360 I = rate PV = mortgage amount FV = ZERO solve for PMT THEN 1 INPUT 120 (1st payment to last payment) this is for 10 years GOLD AMORT Then = = = to cycle

Answer 3

Step 1: cost of first year of college- inflate current PV cost by # of years til college and expected INFLATION rate Step 2: BEG MODE determine amount at age 18 Step 1 result = PMT n=4 i = REAL rate PV Solve (should be less than PMT x 4) Step 3: determine how much to save (PV or PMT annually) step 2 = FV n = # of years til college i = earnings rate Solve PV or PMT

Answer 4

529 two types: college saving or prepaid tuition

Answer 5

$2k limit per student (not per donor) ESA education savings account better than EE bonds but not enough can be used for K-12 but now so can 529's distributed by age 30 asset of the parent Coordinates with AOC, LLC and 529

Answer 6

100% of first $2k 25% of next $2k max $2500 MAGI phase out NO FELONY Drug conviction allowed Coordinates with LLC, Coverdell ESA and 529

Answer 7

20% of first $10k max $2000 MAGI phaseout Lifetime = felony drug conviction allowed Coordinates with AOC, Coverdell ESA, and 529

Answer 8

3-6 mos Fixed + Variable + Real Estate Taxes

Answer 9

Checking Govt money market CDs <= 90 days savings accounts Laddered CDs <= 6 months if checking account < one month of expenses it counts as 0 towards emergency fund

Answer 10

Current assets: cash equiv, marketable securities, A/R, inventory. NOT 401k or IBonds. Current Liab: cash owed, A/P, credit card debt, taxes payable, current amount of mortgage due

Answer 11

tax deductible if: directly paying ex spouses rent, mortgage, tax, or tuition life insurance premium payments if policy owned by ex spouse where payor is insured NOT deductible: non cash services, promissory notes, use of property payments to maintain property owned by the payor

Answer 12

Compensatory for personal injury- tax free, except interest Punitive - taxable - except wrongful death Compensatory for discrimination or non personal injury - taxable except for medical expenses

Answer 13

choice of lump sum or annuity - taxable irregardless for full value in gross income choice of cash or annuity and chooses payout over 10 years - taxable as rec'd ("qualified prize options") Basically < 10 years, taxable upfront >= 10 years taxable as received

Answer 14

Deflation - opposite of inflation - decline in prices Disinflation - downward movement of inflated prices - slowing down Stagflation - slow econ growth + high unemployment (stagnation)

Answer 15

Social Security and Medicare (FICA) Regardless of the amount employees contribute to Social Security and Medicare, employers are responsible for filing the entire tax. Once the total liability has been calculated and the correct amountsubtracted from employees' paychecks, the remaining portion must be paid by the employer. Social Security: 6.2%. Frequently labeled as OASDI (it stands for old-age, survivors and disability insurance), is withheld on the first $160,200 of wages in 2023. Medicare: 1.45%. Additionally, employers typically have to withhold an extra 0.9% on compensation over $200K (single)/$250K (MFJ).

Answer 16

Together with state unemployment insurance programs, employees who lose their jobs may be entitled to payments through the Federal Unemployment Tax Act. This tax cannot be deducted from employee wages, because it is solely an employer tax.

Answer 17

NO: EE contributions to FSA ER contributions to HSA ER matching contributions to 401k plans Section 125 plan Distributions from IRA Contributions to non qualified deferred comp - not reqd due to risk of forfeiture Yes: EE contributions to HSA, unless a section 125 cafeteria plan Section 457 - treated as deferred comp 401k plan Elective deferrals - subject to F/F but not ord income tax ER payments to section 162 programs (bonus in form of life/disability treated as income) Social security retirement benefits Distributions from non qualified deferred comp plans - treated as wages Earnings distributed from Roth

Answer 18

Sale of residence Exclude gain up to 250K / 500K MFJ must be principal residence and lived in 2 of 5 years Exception: less than 2 years but moving b/c of new job, health reasons, or "unforeseen circumstances", only if GREATER THAN 50 miles Exclusion amount is prorated if less than 2 years reported on schedule D Can be netted with other gains/losses

Answer 19

Expensing 1245 tangible property used in business (instead of depreciating) in the year of acquisition up to $1.22 M not to exceed profits/income

Answer 20

1245 CAT Computer Auto light Truck (5 years) 1245 Office furniture (7 years) 1250 Residential rental property - REAL PROPERTY (27.5 years) 1250 Non residential - REAL PROPERTY (39 years)

Answer 21

Like kind exchange of property

Answer 22

Exchange of life / annuity

Answer 23

Amortization of intangibles (good will, logos, copyright) straight line 15 years

Answer 24

Umbrella for real or depreciable BUSINESS property held > 1 year taxed at cap gains rate vs ord income Includes 1245 and 1250

Answer 25

709 - gift tax filing - on cloud NINE 706 - estate tax filing - SIX feet under

Answer 26

Limits on qualified retirement plans

Answer 27

closely held small business capitalized initially with < $1m loss ordinary income up to 50K / 100K MFJ per year + capital loss up to $3k without 1244 can only take a $3k capital loss and carry forward the remainder

Answer 28

Small business Gain exclusions Section 1202 allows capital gains from qualified small business stocks to be excluded from federal tax. Among other rules, the stock must be held for at least five years in order to exclude the gains.

Answer 29

Exec bonus plan A Section 162 bonus plan, also known as an executive bonus plan, is a way for companies to use life insurance to attract, reward, and retain key employees. The plan can be structured in many ways, depending on the company's needs and goals. Some examples of options include: Performance tie-in The bonus amount is withheld or decreased if the employee doesn't meet certain goals or benchmarks Double bonus The bonus is enough to cover the premium and any taxes the employee will owe ER pays premium directly, not deductible unless company is the owner BONUS is taxable to EE as phantom income Double Bonus may be used to cover the taxes

Answer 30

Re paying taxes on options at grant (up front)

Answer 31

A CFP® professional must comply with the Practice Standards, and therefore, provide Financial Planning, when: a. The CFP® professional agrees to provide or provides: i. Financial Planning; or ii. Financial Advice that requires integration of relevant elements of the Client’s personal and/or financial circumstances in order to act in the Client’s best interests (“Financial Advice that Requires Financial Planning”); or b. The Client has a reasonable basis to believe the CFP® professional will provide or has provided Financial Planning.

Answer 32

The number of relevant elements of the Client’s personal and financial circumstances that the Financial Advice may affect; b. The portion and amount of the Client’s Financial Assets that the Financial Advice may affect; c. The length of time the Client’s personal and financial circumstances may be affected by the Financial Advice; d. The effect on the Client’s overall exposure to risk if the Client implements the Financial Advice; and e. The barriers to modifying the actions taken to implement the Financial Advice.