Chapter 3 - Customer Accounts - Objectives and Tax Issues

Question 1

What is some of the important information to obtain when opening a new client’s account?

Answer 1

• Name
• Address
• Age
• Occupation
• SSN
• Citizenship
• Income
• Net Worth
• Objectives
• Ris Tolerance
• Investment Experience

Question 2

What is not pertient when opening an account, a client’s educational or financial background?

Answer 2

Educational background

Question 3

If a client refuses to provide certain information, may the account still be opened?

Answer 3

Yes, although name and address are required.

Question 4

If a client wins $1 million, what should an RR do?

Answer 4

Update the account form

Question 5

True or False: Using a P.O. Box as an address is not acceptable to open an account.

Answer 5

True.

An actual address is required; however, mail may be sent to a P.O. Box

Question 6

If an asset was held for one year or less prior to its sale, any gain or loss would be ______.

Answer 6

If an asset was held for one year or less prior to its sale, any gain or loss would be short-term.

Question 7

For a gain to be considered long-term, the asset must be held for ____.

Answer 7

For a gain to be considered long-term, the asset must be held for more than one year.

Question 8

What is the furst use of capital losses?

Answer 8

They are first used as deductions against capital gains.

Question 9

If there are losses remaining after offsetting gains, what amount may be used against ordinary income?

Answer 9

a maximum of $3,000

Question 10

What happens to losses that remain after offsetting gains and also taking $3,000 against ordinary income?

Answer 10

They are carried forward to subsequent years.

Question 11

What generates a capital gain or loss?

Answer 11

The sale of an asset at a price that exceeds its basis (gain) or at a price lower than its basis (loss)

Question 12

How large can a gift be between spouses and remain exempt from the gift tax?

Answer 12

An unlimited amount

Question 13

Progressive taxes are also referred to as ______ taxes.

Answer 13

Progressive taxes are also referred to as graduated taxes.

Question 14

Regressive taxes are also referred to as ______ taxes.

Answer 14

Regressive taxes are also referred to as flat taxes.

Question 15

Sales tax is an example of a _______ tax.

Answer 15

Sales tax is an example of a regressive or flat tax.

Question 16

Is a gift of $14,000 per person, per year, exempt from gift tax?

Answer 16

Yes

Question 17

Is a gift of $28,000 per married couple, per year, exempt from gift tax?

Answer 17

Yes

Question 18

What are the capital gains tax rates?

Answer 18

Short-term gains are taxed at ordinary income rates, and long-term gains are taxed at a maximum of 20%

Question 19

Income and estate tax are examples of a ______ or ______ tax.

Answer 19

Income and estate tax are examples of a progressive or graduated tax.