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Learned In Practice > Deck 5 > Flashcards

Deck 5 Flashcards

1
Q

How should a CFP respond when receiving a $1500 case of wine in thanks for a referral?

A

Notify the client.

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2
Q

What is the AUM threshold for registering with the SEC?

What if you just have an online practice?

A

$100m

With an online practice you have to register with the SEC as well.

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3
Q

Is regulatory risk systemic or non-systemic?

A

Systemic

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4
Q

Can you net passive income from publicly traded companies with that from private companies?

A

No.

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5
Q

When you’re evaluating one manager’s performance, should you use Sharpe or Trainor? What’s the mnemonic?

A

Use Sharpe for one manager. Sharpe solo, team Trainor.

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6
Q

Self-regulated orgs. (Like brokerage houses) are overseen by whom? What is the SEC’s role?

A

Brokerage houses are overseen by FINRA. The SEC is more concerned with new issues.

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7
Q

Can you mix and match how you treat different donated stocks to achieve the highest possible charitable deduction?

What is the highest possible charitable donation deduction from donated stock?

A

Yes. The highest possible charitable deduction for donated stock is 50% of AGI.

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8
Q

Who alone contributes to SEPs?

A

The employer only!

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9
Q

Where do you put mortgage interest in the calculation of whether or not to buy a building?

A

Nowhere! It’s just NOI ÷ capitalization rate.

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10
Q

What is the split on split definition disability insurance?

A

Own occupation for 2 years, switching to “modified any occupation” which is anything someone with your training can do.

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11
Q

What are residual disability benefits?

A

Disability benefits that you get if you can still work, but not as much as before.

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12
Q

How long do you have to make an 83b election?

A

30 days after grant.

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13
Q

What is a devise? What happens when it’s done to JTWROS property?

A

A devise is a bequest in a will. JTWROS property passes outside the will, so a devise doesn’t apply.

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14
Q

T or F: For property passing by operation of law, the titling of the instrument determines who will receive the property.

A

True.

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15
Q

Can a CFP lend money to a client?

A

Generally not, but they can if the client is a family member, or if the CFP is in the business of lending money.

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16
Q

Can a decision to bar someone on the “Presumed Bar” List be appealed?

A

Yes.

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17
Q

Is it an ethical lapse for a CFP to refer one client to another for professional services?

A

Yes.

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18
Q

What are the two jobs of a claims adjuster?

A
  1. Assist the insured in preparing a proof of loss.

2. Determine if a covered loss has occurred.

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19
Q

Is it possible to buy a stand alone Comprehensive Personal Liability Policy (CPL)?

A

Yes.

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20
Q

Do EE bonds have a phase-out for interest income tax exclusion?

A

Yes

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21
Q

Should you have tax advantaged investments like municipal bonds in a Roth?

A

No! Investment gains in Roths are already tax free.

22
Q

Can you sell unit trust shares back to the investment?

A

Yes.

23
Q

According to Dalton, 91% of profits in the market are made from?

A

Proper asset allocation.

24
Q

What are the 3 ways you can be a material participant?

A
  1. Devote more than 500 hours.
  2. Devote more than 100 hours and more than anyone else.
  3. Devote more than 100 hours and have enough hours from other activities to total more than 500.
25
Q

Rental income is considered passive income. Investment income is portfolio income. Do short-term rentals such as DVDs, or bikes qualify as passive income? Why not?

A

No. To be passive the rental must be at least 7 days.

26
Q

What are 3 exceptions to the passive activity rules for rental businesses?

A
  1. Rental period is generally 7 days or less.
  2. Rental period is 30 days or less, and the taxpayer provides additional service and materially participates.
  3. Rental property is incidental to other business.

There is a fourth about rental only during business hours and available to other customers.

27
Q

What is the 37.5 year rule in the GSTT?

A

For non-lineal descendants only, you can give stuff to people within 37.5 years of your age and it’s not GSTT taxed.

28
Q

How do you compute generation skipping transfer tax? Hint: the rate is 40% once exclusions are used up.

A

You add the GSTT amt to the value of the gift and pay the gift tax.

29
Q

When does a trust become a skip person?

A

When all interests in the trusts are held by skips, and no non-skip holds an interest in the trust.

30
Q

What is the gift tax value of a Whole Life insurance policy?

A

Interpolated terminal reserve.

31
Q

Do IRA’s and annuities get a step to FMV at death?

A

No, they’re IRD assets.

32
Q

When is an UGMA included in the gross estate of the parent?

A

When the child is younger than the age of majority, and the parent is the child’s guardian and custodian of the UGMA.

33
Q

What are the 6 ADL’s?

A

Bathing, dressing, toileting, transferring, eating and continence

34
Q

What does Jensen’s alpha tell you?

A

How a fund manager performed relative to how he was expected to perform on a risk-adjusted basis.

35
Q

Are hobby losses deductible at all?

A

No.

36
Q

Can you have a capital gain on an insurance settlement on a business vehicle?

A

Yes! If you’ve taken depreciation, and your settlement is above your cost basis.

37
Q

What accounting method must large business use? What about small businesses?

A

Large businesses must use the accrual method. Small bus. < 26m gross receipts can choose accrual or cash basis.

38
Q

Describe the accrual method of accounting.

A

Income is reported as it is earned, expenses are reported as they are incurred.

39
Q

Must corporations use the accrual method? What about partnerships with a corporate partner?

A

Yes and yes.

40
Q

Can you exclude employees with a collectively bargained pension plan from participation in a qualified plan?

A

Yes, they already have a pension plan.

41
Q

What is the minimum % of ownership to create a parent-subsidiary relationship between two companies?

What is the significance of a parent-subsidiary relationship?

A

80%

Parents must cover subsidiary employees under the same plan or under a plan with similar benefits

42
Q

Do pensions demonstrate stability to a lender?

A

No. Often the opposite if they have a mandatory contribution like with a pension plan.

43
Q

What are the limitations on life insurance in a QP to keep it as an incidental benefit?

A

25% of total contributions for term and universal, 50% for whole life

44
Q

What vesting is required if eligibility is greater than 1 year?

A

Immediate

45
Q

Which type of plan can use 3-7 year graded vesting?

Which type must use 2-6?

A

DB plans can use 3-7

DC plans must use 2-6.

46
Q

Is there a 10% penalty if you’re 55, quit your job, and withdraw your total qualified plan balance?

A

No. You can withdraw from your QP if you’re over 55 and have separated from service.

47
Q

Do you pay Social Security taxes (FICA) taxes on CODA contributions?

A

Yes.

48
Q

Who is covered by the PBGC?

A

DB plans with 25 employees or more.

49
Q

Are premiums paid for LI taxable to the participant?

A

Yes

50
Q

What is an Enrolled Agent?

Who else can represent a taxpayer to the IRS?

A

An Enrolled Agent is someone who can represent taxpayers to the IRS. CPA’s and attorneys also can.

Learned In Practice (8 decks)

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