General Principles Ch 7 Flashcards
For divorce is finalized after December 31, 2018, alimony _______ be deductible by the payor nor includable in the gross income of the payee.
Will not
Any payments made to maintain property _______ by the payor are not alimony.
Owned
Only life insurance premiums on the _________ spouse qualify as alimony.
Payor
Payments that continue after the payee spouse’s death are considered _________.
Child support
Tuition payments on behalf of the payee spouse qualify as _______ if made pursuant to the divorce instrument.
Alimony
The 1984 tax act provides that any transfer of property between spouses incident to a divorce is ________.
Gift tax-free
With the transfer of property between spouses due to divorce, the transferor’s basis in the property ______ “ carried over” to the transferee.
Is
True or false:
There is no step-up in basis in divorce settlements.
True
The best transfer of property arrangements for the exam for unmarried domestic partners are ____________.
Revocable trust and tenancy in common
Under COBRA, employers providing group or self funded health coverage are required to offer terminated employees the right to buy continued health coverage. Small companies with fewer than _____ employees are exempt from the federal legislation.
20
COBRA
Qualifying event:
voluntary or involuntary termination; change from full-time to part-time
Coverage must be offered to:
Terminated employees and other dependents
Continuation period:
Up to _________.
18 months
COBRA
qualifying event:
Employee’s death, divorce, legal, separation, or eligibility for Medicare
Coverage must be offered to:
______________
Continuation period:
Up to 36 months
Spouses and other dependents
COBRA
Qualifying event:
LOSS OF DEPENDENT STATUS (marriage, reaching dependency age limit specified by plan)
Coverage must be offered to:
Dependents whose status changed
Continuation period:
________
Up to 36 months
A ___________ is a voluntary agreement between the personal injury victim and the defendant who was deemed to be negligent.
Injury victims will receive a stream of ________ payments, perhaps tailored to meet future medical expenses and living needs.
Structured settlement / tax-free
___________
___________ Damages received because of personal physical injuries or physical sickness are generally tax-free. However, interest paid on a tax free damage award is _________.
Compensatory / taxable
Damages received in discrimination or other non-physical injury cases are _______ with one exception: damages up to the amount of actual medical care, expenses attributable to emotional distress, like psychiatric care _________.
Taxable / tax-free
_______ damages, generally are taxable, regardless of the nature of the claim.
Punitive
Damages paid to a beneficiary in conjunction with wrongful death or received ________.
Tax-free
_______ represents federal taxation and spending designed to level out the business cycle and achieve full employment, price stability, and sustained growth in the economy. It is independent of monetary policy.
Fiscal policy
_________ policy is action taken by the federal reserve to influence the growth of the money supply.
Monetary
The feds sets the level of _____ that its member banks must maintain. The Fed rarely changes the______ requirement due to “ multiplier effect.”
Reserve / reserve
The rate the federal reserve charges its member banks to borrow to meet reserve requirements
Discount rate
The interest rate, the commercial banks charge their most credit worthy corporate customers
Prime rate
The feds sets initial margin rates for securities under ______.
Reg T
The federal reserve trading desk adjusts _______ availability daily through re-purchase and reverse repurchase agreements with government securities dealers.
Credit
Under a “_____,” the Fed gives the dealer funds in return for a temporary pledge of government securities ( buys bonds).
Repo
Under a “_______,” the Fed, gives the dealer a temporary pledge of government securities in return for cash (sells bond).
Reverse repo
The charge for overnight loans from one bank to another (set by auction). It is not set by the Fed.
Federal funds rate
If the Fed purchases bonds, it will be pursuing a(n) _______ money policy.
Easy
If the Fed stops buying bonds (decreased purchases), _______ will tighten.
Credit
To tighten credit, the Fed can _____ margins, ________ the reserve requirements, _______ the discount rate, and sell bonds
Increase / increase / increase
A market basket of selected goods and services in various cities across the country. Has eight major categories, including food and beverages, apparel, education and communication, housing, transportation, other goods and services, recreation, medical care.
Gross domestic product (GDP)
An index of the price of various items, such as farm products and industrial commodities; does not include the value of services.
Producer price index (PPI)
The leading indicator of inflation trends
Producer price index
If labor productivity is rising and unit, labor costs are falling, what stage of the business cycle is probably occurring?
Recovery and expansion. Recovery and expansion operate together on the business cycle.
Indicators that usually anticipate, or move before changes in the economy. Examples include initial claims for unemployment insurance, new manufacturing orders, new private, housing units, stock, prices, 500 common stocks, index of consumer expectations.
Leading economic indicators
Indicators that move in tandem with the broad economy, including number of employees on non-agricultural payrolls, personal income, less transfer payments, industrial production
Coincident indicators
Indicators that usually respond after the economy has already begun to change. They include average duration of unemployment, average prime rate charged by banks, commercial and industrial loans outstanding, ratio of consumer/installment/credit outstanding to personal income, change in the consumer price index for services
Lagging indicators
Industries that have little sensitivity to the business cycle, including food, producers, certain pharmaceuticals, and public utilities
Defensive industries
Items that do not wear out quickly, including cars, appliances, business equipment, electronic, equipment, home furnishings and fixtures
Durable goods
Goods that may be used up immediately or have a short lifespan. People always need them. Examples include cleaning products, food fuel, office supplies, packaging and containers, paper and paper products, personal products, clothing and footwear.
Nondurable goods
The rise and prices of goods and services. Too much money chases too few goods.
Inflation
The decline in the price of goods and services
Deflation
The combination of slow, economic growth, and high unemployment with rising prices
Stagflation
The slowing down of price increases; a downward movement of inflated prices
Disinflation
The yield curves show the market rates of interest for bonds of_______ maturities with the ______ credit ratings
Different / same
The “ normal” shape of the yield curve shows that as maturities _____, yields ______.
Lengthen / increase.
With yield curve, inverted, short term rates _______ long-term rates
Exceed
Yield curves relate time to maturity and yield to maturity for bonds of the _______ risk class.
Same
When yield curves are shifting from positively sloped to negatively sloped, because interest rates are rising, debt instruments with _______ durations should decline less than those _________ durations.
Short / longer
Components of the ________ curve:
Yield to maturity
Same tax status
Term to maturity
Same bond quality
Yield
