General Review - Questions Flashcards
Under the double basis rule, no ______ is recognized if the donee sells the property at a price that is _____
no gain/loss is recognized if the donee sells the property at a price that is between the donor’s adjusted basis and the FMV on the date of the gift
Are proceeds from an installment sale considered earned income for Social security purposes?
NO
Social security benefits may be reduced for individuals ______ with _____
under full retirement age with earned income above certain levels
If you reach full retirement age and have earned income, can your social security be reduced?
NO
Individuals can deduct up to ______ of rental real estate losses against active and portfolio income, provided they are ______ and own more than ______ of all interests in the activity
$25k, provided they are active in the management and own more than 10% of all interests in the activity - reduced by 50% of AGI in excess of $100k up to $150k
Defined contribution plans must vest at LEAST as rapidly as ____- or _____
3 year cliff or 2-6 year graded vesting
The ratio percentage test for nondiscrimination =
(% of NHC employees covered) / (% of HCE covered) > 70%
The average benefits test for nondiscrimination =
NHC % benefit / HCE % benefit
Fluctuating cash flows can make a _____ a good plan type
profit-sharing plan
Imputed interest on an interest-free loan is considered a gift if the loan is over ______ or if the recipient has _____ in excess of ______
loan over $100k or net investment income over $1k
A CRUT pays a particular _____ of the trust assets each year
particular %
Gift loans of ____ or less are not subject to gift tax unless the donee uses the proceeds to ______
gift loans less than $10k not subject, unless used to buy income-producing property
Premiums for excess group life insurance over ______ have to be included in gross income
over $50k - use the IRC group term premium per $1,000
SMAs offer _______ portfolios and ______
customized and asset-based fee structures
Employee elective deferrals into section 401(k) plans are subject to _____ but not to _____
subject to FICA but not to federal income tax
To qualify as a CRAT, CRUT, or CLAT, the trust has to be _____
irrevocable
If you expect to die within 3-5 years and have a big life insurance policy, what is the most pressing estate consideration?
transfer the life insurance policy to someone else
If you supplied all the consideration for an account, will changing it to JTWROS help your estate plan?
NO - because 100% of the account will be included in your estate
What is the maximum LTCL you can take in one year against income?
$3k
Is child support excluded from gross income?
YES
Is alimony excluded from gross income?
NO
Are gifts included in gross income?
NO
Under the at-risk rules, you cannot deduct more than your ______
invested capital “at risk”
For involuntary conversion of real property due to natural events, the reinvestment period is _____; for acts of government/eminent domain, it is _____; if into cash, nonrecgonition is ______
nature = 2 years govt = 3 years cash = norecognition is elective
To get to net capital gain/loss, can you net ST and LT against each other?
YES
For the related party rule, if you sell something to a related party (e.g. son) for a gain or loss, you cannot _______
recognize it
For the related party rule, if you were the recipient of the property and then subsequently sell it, you can reduce your gain up to the amount of the gain by the original seller’s ______
loss
Is the grant date of an NQSO or ISO the date that W-2 income is created?
NO for either
Once vested, can NQSOs and ISOs be exercised and the stock sold immediately?
YES
Only defined benefit pension plans (including ______ ) are _____
including cash balance pension plans are covered by the PBGC
Because SEPs are funded with IRAs, it cannot have a ____-
loan provision
Do SEPs require a specific employer contribution each year?
NO
Age-based profit sharing plans favor _____
older employees
All pension plans must provide a qualified ______ annuity and ______annuity
preretirement survivor annuity and a joint and survivor annuity
If you defer your RMD until April 1 following reaching 70.5, you must then take _____
another RMD in that same year (can’t wait till April 1 for subsequent RMDs)
Tenants by entirety can only be owned by ____
spouses
Each owner for tenants by entirety have an _____ interest
equal ownership interest
For tenants by entirety, transfer of property requires _____
consent from both owners
Probate does not include any property that passes by ____, ____, or ______
by law, by contract, or under the terms of a trust
If a stock is not traded on a gift date, then the stock price is the value before and after the gift date multiplied and divided by the number of ____-
TRADING days
For gifts where the FMV is less than the donor’s adj basis, the donee’s basis for determining a loss is the ____, the donee’s basis for a gain is the donor’s ______
for a loss, it is the FMV, for a gain it is the donor’s adjusted basis
In determining adj basis for the donee of loss property, are gift taxes paid included in the basis?
NO
If someone has diminished capacity, is referring them to medical providers part of your fiduciary responsibility?
YES
A transfer to a spouse or ex-spouse, regardless of age, is or is not subject to GSTT?
IS NOT
A spouse or former spouse of the transferor’s lineal descendant is assigned to the same ______
generation as the lineal descendant
If a grandchild’s parents die, can you give them a gift and avoid GSTT?
YES
Would adjusted basis in a property be listed on a statement of financial position?
NO - only FMV
If you’re thinking of moving in 3-5 years, what kind of mortgage should you consider?
ARM
Are contributions to a CESA tax deductible?
NO
Elementary school and secondary school tuition up to ____ per year is considered qualified expense under section 529 plans
up to $10k
Can Series EE bonds be used for high school expenses?
NO
Debts that are not dischargeable under chapter 7 are:
international tort claims, alimony obligations, child support, student loans, govt loans, and recent federal income taxes due
Does FDIC insure an IRA in addition to a joint or individual account?
YES, separate account category
Option A for UL policies is the ____
level death benefit option (only includes face amount)
Option B for UL policies the ______
increasing death benefit (death benefit equals the face plus cash value)
Are perkins loans needs-based?
YES
Medicare Part A pays for skilled nursing for the first ____ days
20
Does Medicare part A provide coverage for custodial care provided in a nursing home?
NO
Voluntary or involuntary termination qualifies an individual for _____ months of COBRA
18 months
Whenever a position created from an ISO is sold, it will have a ____ AMT adjustment
negative
Is selecting a random set of stocks for a portfolio indicative of a belief in EMH?
YES - for the test
A coupon rate and duration have a direct or inverse relationship?
inverse
AMTI calculation includes:
- excess depletion deduction over the adjusted basis
- excess of FMV above the exercise price for freely transferable ISOs
Can you claim a dependent for yourself and your spouse?
YES - you would get 2 dependents
For charitable contributions you can deduct the FMV up to ____ of AGI, or the adjusted basis up to ____ of AGI
FMV up to 30% of AGI, or adjusted basis up to 50% of AGI
Under the kiddie tax rules, unearned income in excess of ______ will be taxed at estates and trusts tax rate
in excess of $2,100
Section 1202 stock must be held for ____ years in order to exclude the gain from taxable income
5 years
The section 121 gain exclusion for a primary residence (gains up to $250k are not taxable) does NOT apply to ______
vacation or other use properties
If you reinvest the dividends in a mutual fund, then the dividends are _____ to your cost basis
added to
The shortcut for calculated alimony recapture in year 3 =
P1 + P2 - 2xP3 - $37,500
Can you make a one time trustee-to-trustee transfer from an IRA to an HSA?
YES - but subject to the max HSA contribution ($3,450 for 2018)
HCE is anyone who owns more than _____ of had comp greater than _____
5% or comp greater than $120k
The max benefit under a traditional def bene plan is the lesser of _______ for 2018 or the average of the highest consecutive three years of comp
$220k
For trad IRA, you can contribute the lesser of your _______ or the IRS limit
earned income
Can you collterize a SCIN?
YES
Private annuities cannot be secured by collateral T/F
TRUE
Qualified disclaimers must be made within ____ months of creation of the interest
9 months
The only two exceptions to the alternate valuation date for estates are _____ assets and assets _____ before the AVD
wasting assets (patents, annuities, installment notes) and assets disposed of before the AVD
Traditionally, a financial planner does NOT owe contractual duties to a third person, however an exception exists when the third party ______
relies on statements prepared by the financial planner
If you withdraw funds from a Roth IRA (after 5 year holding period) for college tuition, will you get hit with the 10% penalty?
NO - but you will have to pay income tax on earnings after all contribution and conversion amounts are withdrawn
For an employer-employee loan, the corporation will accrue ______ and additional _____, but their taxable income will _____
accrue interest income and additional comp expense, but their taxable income will not be affected
If you use a corporate loan to go on vacation, do you incur imputed interest as an addition to your net income?
YES
If a loan is classified as a corporation-shareholder loan, will the corporations taxable income increase due to imputed interest?
YES
Can you reduce your basis in a property by construction costs?
NO
A private placement is limited to ______ unaccredited investors but is available to an unlimited number of accredited investors
35
Are defined benefit plans more costly than defined contribution plans?
YES
Insurance proceeds payable to a divorced spouse because of death of the former spouse are taxable income or not?
NOT
LIFO recapture applies only to _____
S CORPS
A C corp could be subject to the following three taxes:
- personal service corporation tax
- accumulated earnings tax
- personal holding company tax
Is a niece considered a skip person for GSTT?
NO
A non-related person more than _____ years younger than the transferor is considered a skip person for GSTT
37.5 years
Employers with more than ____ cannot offer a SIMPLE
100 employees
Are money purchase pension plan contributions flexible?
NO - fixed percentage of compensation
IF you are an older business owner, would you benefit more from a money purchase pension plan or a traditional defined benefit plan?
traditional defined benefit because you have fewer years till retirement
Standard deviation is a measure of ______ risk
TOTAL (systematic and unsystematic)
If you think a meeting will not be productive because the client is not focused, what should yo do?
RESCHEDULE
Do ESOPs and stock bonus plans INCREASE or DECREASE cash flow for the company?
INCREASE because contributions are made in stock
When can a professional corporation NOT establish an ESOP or stock bonus plan?
when state law requires all shareholders of a prof corp to be licensed professionals
If a business owners annual retirement funding goal exceeds allowable contributions for other plans, what should they adopt?
defined benefit pension plan (part-time employees need not be covered)
Personal casualty losses are only deductible if they are caused by a ______ disaster
federally declared
Are alimony payments deductible for AGI?
YES
Can you deduct union dues?
NO
In a community property state, spouses own an ______ in all community property accumulated during their marriage
equal and undivided interest
Only the portion of property owned by the decedent can be transferred by ____
will
What is the maximum % premium for COBRA?
102%
Does a market average or a market index reflect the average price behavior or a group of stocks at any given point in time?
market AVERAGE
Gift taxes paid out of pocket are ONLY excluded from the gross estate if the donor’s date of death is not within _____ of the gift
3 years
The current value of a gift for a GRAT or GRUT is equal to the FMV of the assets transferred less the PV of the _____ retained by the grantor
PV of the income interest retained by the grantor
A retirement plan can cover any portion of the workforce, as long as it satisfies ______ under section 410(b)
1 out of 3
The three tests under section 410(b) are ______
percentage test, ratio test, the average benefit percentage test
Pretax retirement plan contributions can be converted to a Roth IRA by any of 4 methods:
- An amount distributed from a traditional IRA can be rolled over to a Roth IRA within 60 days after the distribution.
- An amount in a traditional IRA can be transferred in a trustee-to-trustee transfer from the trustee of the traditional IRA to the trustee of the Roth IRA.
- An amount in a traditional IRA can be transferred to a Roth IRA maintained by the same trustee.
- Amounts in a qualified plan described in IRC Section 401(a) can be converted directly to a Roth IRA.
If you retain a life estate in a gifted property and then die, is the FMV at death included in your gross estate?
YES
Is the sharpe ratio useful for measuring non-diversified as well as diversified portfolios?
YES - because it uses TOTAL risk
Even if you use a credit card to pay for tuition, does that get discharged in bankruptcy?
YES - all credit card debt, no matter the use of the funds
What form does an INDIVIDUAL use to register with FINRA?
U-4 (firms use ADV)
Do phantom stock plans have an exercise date controlled by the employer?
YES
How to phantom stock plans pay benefits?
in CASH
Are phantom stock plans funded or unfunded?
UNFUNDED
Does ERISA or the DOL monitor fiduciaries for retirement plans?
DOL
Does a SEP plan allow employee contributions or loans?
NO, neither
Does a cash balance pension plan require mandatory funding?
YES
does a SIMPLE allow loans?
NO
The collateral source rule states that a person who commits a tort is liable for _____
full damages
The collateral source rule states that a person who commits a tort is liable for full damages, even if the plaintiff has ____
other sources available for recovery
The collateral source rule prevents a person who commits a tort from benefiting from _____
fortuitous circumstances
Under the Employer Educational Assistance Program, an employer can reimburse an employee’s tuition, enrollment fees, books, supplies, and equipment up to _____ per year
$5,250
Would you disclose your compensation arrangement prior to having a client fill out a risk management questionnaire?
YES
Can you ever be reinstated if your CFP marks have to revoked?
NO - permanent
The Principle of Diligence includes properly ______ subordinates or other who provide professional advice in the engagement
supervising
If someone has no savings, would you have them start a savings account or defer into a 401(k) as a first step?
start savings account
Are the CFP Principles legally binding?
NO
Are the Rules of Conduct legally binding on all certificants, regardless of a title, position, type of employment, or method of comp?
YES
Any act that violates state criminal law constitutes ground for CFP discipline, even if the act did not occur in the course of a ______ or if they are acquitted of criminal charges
in the course of a client relationship
Bait and switch advertising is prohibited by the _____
FTC
Consumer debts should be no more than ______ of net income
20%
Are UGMA assets considered for financial aid?
YES - they are in the child’s name
If you have a written contract and fail to provide the services contained within, you may be liable for _____
breach of contract
Changing a client’s beliefs and attitudes towards financial decision making is using the _____ approach to financial counseling
cognitive-behavioral
Land can never be depreciated for income tax purposes T/F
TRUE
The IRS limit for audits on a tax return with a demand to pay additional taxes is ______
3 years after the taxpayer filed the return in question
Under the transfer-for-value rules, when the transfer is to a transferee whose basis in the policy is determined by reference to the transferor’s basis (tax-free exchange or gift), the resulting death benefit is _____
not taxable to the transferee
Regular C corps with gross income greater than _____ for their most recent 3 years are prohibited from using the _____ method
cash
Stepped-up basis is not available when a donor gives property to a donee in anticipation of their death, and their will has the property going back to the donor. T/F
TRUE - no stepped up basis
If a child of a taxpayer is under the age of ____ or if the child is full-time student under the age of ____, then the _____ is waived
if they are under the age of 19 or full-time student under the age of 24, then the income test is waived
What is the max deduction for student loan interest?
$2,500
Life insurance policy dividends are not _____ unless the aggregate dividends received exceed the _______
are not taxable unless the agg dividends exceed the basis int the contract
Section 1231 defines property used in a trade or business as ______ or _____
depreciable or real property
Section 1231 property must be held for more than _____ and excludes:
more than 12 months and excludes
- inventory
- property primarily for sale
- copyrights
- certain publications of the US gov’t
The capital gains rate on section 1202 stock is _____
28%
S corp elections must be made no later than the _____ of the ____ month of the current tax year
15th day of the 3rd month of the current tax year
Do all S corp shareholders have to be US citizens or residents?
YES
