Exam Defaults

Question 1

What is the default for an LLC?

Answer 1

Partnership b/c it’s usually adopted by a corp that is taxed as a partnership; offers ltd liability of corp and passthru of partnership

Question 2

If not specified, what’s the default for dividends? What investments typically throw off this type of income?

Answer 2

Ordinary

REITS, MLPs, MM and Bond Funds

Question 3

What’s the type of entity and holding period for dividends to be considered qualified?

Answer 3

Typically qualified corp (US stocks) and the holding period is 60 out of last 121 days in order to be considered qualified.

Question 4

Default coinsurance requirements

Answer 4

Home = 80%
Commercial = 90%

Question 5

What is automatically considered a MEC?

Answer 5

All single premium annuities or life insurance policies

Question 6

Are all bonds considered “plus accrued”?

Answer 6

YES (zeros accrete)

Question 7

For LI, should we assume option A or B, and what’s the difference?

Answer 7

Default = A

A = Level Benefit
B = Increasing Death Benefit (for inflation)

Question 8

Coverdell

Answer 8

Deposits up to 18; must be dist by 30 or rolled to someone else