General Principles Chapter 7

Question 1

Alimony Test for Deductibility

Answer 1

ONLY BEFORE 2019 (bc of TCJA)

deductible:
-cash payments from payor spouse for mortgage, rent, tax tuition etc
- premium payments made by payor for life insurance owned by payee and insured is payor (PREMIUMS ON PAYOR SPOUSE)

not deductible/not alimony
payments to maintain property owned by payor/used b payee
transfers of noncash items

Question 2

1984 Tax Act

Answer 2

any transfer of property between spouses incident to divorce is tax free gift, basis transfers

Question 3

Who Claims Childs Deductions In Divorce

Answer 3

typically the custodial parent, but divorce agreement can be for the noncustodial parent if that is what is agreed up

Question 4

Additional Coverage for a Disabled Person

Answer 4

SSDI
workers comp
employer provided disability insurance
medicare or medicaid benefits

Question 4

Who does Intestacy Favor if there is no will

Answer 4

blood relatives

Question 5

Best transfer arrangement for unmarried domestic partners

Answer 5

revocable trust
tenancy in common

Question 6

COBRA Features

Answer 6

employers are required to offer terminated employees the right to buy continued health coverage (less than 20 employees full or part time are exempt)

Question 7

Cobra Qualifying Event: termination, full to part time

Answer 7

coverage offered to terminated employee and other dependents for 18 months

Question 8

Cobra qualifying event: death, divorce legal sep

Answer 8

coverage offered to spouses and other dependents
up to 36 monthsl

Question 9

loss of dependent status (marriage, reching dependency)

Answer 9

dependents whose status changed
up to 36 months

Question 10

ACA - Affordable Care Act

Answer 10

guaranteed enrollment with no preexisting condition exclusion

Question 11

Structured Settlement

Answer 11

stream of tax free payments

Question 12

Compensatory Damages Tax Treatment

Answer 12

tax free, interest is taxable (unless damages are paid over time periodically, annuitized, even earnings/interest is tax free)

Question 13

Punitive Damages

Answer 13

taxable UNLESS it is in conjunction with wrongful death

punish wrongdoing by negligent defendent

Question 14

Prizes/Awards Tax Treatment

Answer 14

full value included in gross income even if annuity is selected

Question 15

Fiscal Policy

Answer 15

fed taxation and spending

Question 16

Monetary Policy

Answer 16

fed reserve board influences supply of money

-reserve requirements
-discount rate
-open market operations
-margin rates

Question 17

Discount Rate

Answer 17

rate the fed charges members to borrow to meet reserve requirements

Question 18

leading indicators

Answer 18

initial claims for unemployment insurance
new manufacturing orders
new private housing units
stock prices, 500 common stock
index of consumer expectations

Question 19

Coincident Indicators

Answer 19

industrial production

Question 20

Lagging Indicators

Answer 20

av duration of unemployment
av prime rate charged by banks
commercial/industrial loans outstanding
ratio of consumer installment credit outstanding to personal income
change in CPI

Question 21

Recession

Answer 21

2 consecutive quarters of real gdp decline

Question 22

Depression

Answer 22

6 quarters (1.5 yrs)

Question 23

GDP

Answer 23

us economy total production of goods and services. no regard for inflation
consumption + investment, govt spending + net exports

Question 24

CPI

Answer 24

market basket of selected goods and services

Question 25

PPI

Answer 25

leading indicator of inflation
index of price of items such as farm products or commodities

Question 26

Durable Goods

Answer 26

do not wear out, cyclical, affected by recession (appliances, toys, etc.) affected by recession

Question 27

Nondurable Goods

Answer 27

not affected by recession because people need them all the time no matter if there is a recession or not.

fuel, food, paper, textiles etc

Question 28

Inflation

Answer 28

rise in price of goods and servicesd

Question 29

Deflation

Answer 29

decline in price of goods and services

Question 30

Disinflation

Answer 30

decrease in rate of rise in price of goods and services

Question 31

Stagflation

Answer 31

combo slow growth & high unemployment

Question 32

Yield Curve

Answer 32

different maturities with same credit rating and tax treatment

maturities lengthen, yields increase (normal curve) - premium/larger payment for more risk w/ longer terms

when fed tightens to slow the economy, short term rates can rise above long term