Chapter 11 MC Flashcards
Pam and Kevin were divorced in 2005. Pam paid Kevin $100,000 of alimony in 2006, $50,000 in 2007, and $10,000 in 2008. Pam took an income tax deduction for the alimony paid every year. What potential tax issues face Pam and Jim in 2009?
Jim may have front loaded alimony payments. Front loading likely occurred due to the varying cash flow stream.
What is the correct definition of a pooled special needs trust?
funded with assets that are commingled with numerous other sources to increase investment results. Each state has a nonprofit organization established to achieve investment benefits.
Which of the following activities can the attorney in fact of a durable power of attorney for health care engage in?
I. expedite filing for Medicare on behalf of the disabled individual
II. borrow against the cash value of a life insurance policy owned by the disabled individual
I only A health care power of attorney allows the attorney in fact to expedite Medicare filing for a disabled individual.
Frank and Jim (both male) are married and live in Massachusetts. Under which status can they file their federal income taxes?
I. married filing jointly
II. married filing single EXCEPT
Neither I nor II
Frank and Jim are both men and cannot file under either married status under current federal income tax rules.
Kevin and Christine were divorced last year. According to the terms of the divorce, Kevin paid Christine $50,000 of alimony payments and $75,000 of child support payments. Which of the following statements is correct?
I. Christine must add $125,000 of income on her tax return.
II. Christine can deduct $75,000 from her tax return. EXCEPT
Neither I nor II
Christine cannot deduct child support payments. She only needs to add $50,000 of alimony payment to her income tax return.
Unmarried partners face all of the following unique challenges in estate planning EXCEPT
They are required to pay federal estate tax when transferring assets to one another at death, regardless of the value of their gross estate.
Unmarried partners are not required to pay federal estate tax when transferring assets to one another at death. Unmarried partners might owe taxes based on the size of their estate, but are not required to pay any more than single individuals.
Richard inherited $200,000 from his grandmother. Richard’s inheritance will be protected in case of divorce when the money is invested in any of the following account titles EXCEPT
irrevocable trust with Richard’s wife as trustee and children as beneficiaries
According to the 2010 Federal Reserve Board’s Survey of Consumer Finances, borrowing for which of the following purposes accounts for the largest percent of total family debt?
Home purchase
Borrowing for the purchase of a home accounts for 70.7 percent of total family debt. (A) is incorrect because education accounts for 3.1 percent of total family debt.
