General Review - Questions v2 Flashcards
Does a power of attorney survive death?
NO
Is a former spouse considered a skip person for GST?
NO
Will QTIP or reverse QTIP trust assets be included in the gross estate of the surviving spouse at their death?
YES in both cases
If you make an interest-free demand loan to someone that is less than $100k, what is the total amount of imputed interest you could incur for gift tax purposes?
Cannot exceed the donee’s net investment income if their net investment income is >= $1,000 (if less than $1,000 then nothing)
What assets don’t receive a stepped-up basis at the time of death?
IRD (installment notes, annuity payments, etc.) and retain their tax characteristics
Tenancy by entirety is only available for _____
married couples
If you gift appreciated property, the donee’s basis is the _____ at the time of gift and their holding period is _______
donee’s basis is the donor’s basis and they also get their carryover holding period
If you gift loss property and then it is sold for a gain, the donee’s basis is the ____ at the time of the gift and their holding period is ______
basis is the donor’s basis at time of the gift and their holding period is the carryover period from the donor
If you gift loss property and then it is sold for a loss, the donee’s basis is the _____ at the time of the gift and their holding period is ______
basis is FMV and holding period starts over at the time of the gift
Would a single life annuity in one person’s name be included in their gross estate?
NO - has no further value when that person dies
If you were to gift your son a house 10 years before your death but lived in it pursuant to an agreement with your son, would that house be included in your gross estate at death?
YES because you maintained a life interest in the property
If a spouse receives a bequest of income from a CRAT or CRUT and is the ONLY income beneficiary, do those trust assets qualify for the marital deduction?
YES
The “unholy” trinity refers to what?
when three different people on a life insurance policy are the owner, insured, and beneficiary
If you buy a life insurance policy on someone else and name a third person as the bene, and then the insured dies, how is the death benefit taxed?
as a gift made to the third person
You only are allowed to add a portion of gift taxes paid on a gift of _______ property
GAIN GAIN GAIN GAIN GAIN
Can you gift split even if one spouse has no assets of their own to gift?
YES
Is portability of the estate exclusion available to non spouses?
NO - portability only for spouses
Is a bequest in a will subject to gift tax?
NO
Is a transfer to a revocable trust with a remained interest a taxable gift to the remainderman?
NO - not a completed gift
If you open a joint bank account and instruct the non-contributing party to NOT draw from it until you die, is that considered a taxable gift when you open and fund the account?
NO - not until the non-contributing party draws on the account for their own benefit
Short term disability generally provides coverage for up to _____, LT disability generally for ______ or until ______
ST - 2 years
LT - 2 or more years and until a certain age (usually 65)
Is a van over 10,000 lbs available to be covered under a PAP?
NO
If you buy a van and use it as a delivery vehicle for your business, can that be covered under your PAP?
NO
If a husband leaves his estate to a trust with his wife as the income beneficiary and with a limited (special) power of appointment (e.g. the right to distribute trust assets to their children), does that qualify for the marital deduction?
NO - that is a terminable interest. Would have to be a general power of appointment so she could benefit from it. Keeps it out of the wife’s estate at death as well.
If a trust is revocable, who gets taxed on the income?
The grantor
Deductible personal casualty losses are limited to those caused be a federal disaster are deductible to the extent they exceed ____ and _____ of AGI (lesser of assets basis or decrease in FMV)
$100 and 10% of AGI
Formula = loss - insurance reimbursement - $100 - 10% of AGI
Are losses allowed for bad business debt?
NO
A target defined benefit plan is a defined _____ plan with ______ accounts
defined contribution plan with individual participant accounts
A forfeitures in a target benefit plan counted toward the annual additions limit?
YES
When exchanging/trading property in like-kind, if the property is primarily held for sale what is the treatment of gain?
must recognize any gain or loss in an exchange held primarily for sale
The grantor of a trust is taxed on income from the trust when the income is used for the ______
grantor’s benefit (which would include an obligation of support)
Ordinary losses result from something other than the sale or exchange of _____ assets
capital
Do you recognize ST or LT losses first? (if you have net losses)
ST
Worthless securities are treated as having become worthless at the end of the year and are treated as ______
long term capital losses
To avoid an underpayment penalty, taxpayers must make estimated payments that are the lesser of (i) _____ of the tax liability on the current year return or (2) _____ of the liability on the prior year return if AGE is _____ (MFJ) or less. If above that threshold, must pay at least _____% of prior year liability to avoid the PENALTY and INTEREST
Less than $150k MFJ
- 90% current year
- 100% prior year
More than $150k MFJ:
- 110% prior year
For home office expenses, what is the % deduction?
10%
Is an executor required to deposit any cash into an estate checking account as soon as the assets are released to the estate?
YES
Does Tenancy in common avoid probate? Does it avoid tax consequences with unequal contributors?
DOES NOT avoid probate, DOES avoid tax issues with unequal contributors
Does a bequest of a life estate qualify for the marital deduction?
NO
To utilize the GSTT exemption, a ____ election must be made if grandchildren are the remainder beneficiaries
reverse QTIP
To qualify for special use valuation, the value of real property in an estate has to amount to _____% or more of the gross estate
25%
To qualify to pay estate taxes on an installment basis, share of the business must be less than ______% of the adjusted gross estate
less than 35%
What assets in an estate don’t receive a step up basis?
IRD (installment notes, annuities, etc.)
If a surviving spouse receives an income interest from a CRAT or CRUT and is the ONLY beneficiary, does that qualify for the marital deduction?
YES
Is a gift tax return necessary if you elect gift-splitting and the amount is under $30k?
YES - always required when gift-splitting is elected
IF you transfer a life insurance policy to an ILIT within 3 years of death, is that included in the gross estate?
YES - any transfer within 3 years of life insurance is included
For Roth IRAs, the 5 year period begins _____ of the taxable year for which the first ______ was made
begins Jan 1 for the taxable year for which the first contribution was made
Does Coverage D for HO policies (uninhabitable coverage) cover fair rental value and cost of meals?
YES
If assets are held in a revocable trust and the grantor dies, do the assets receive a stepped-up basis? are they included in the gross estate?
YES receive stepped-up basis and YES are included in gross estate
Can a profit-sharing plan be established after the close of the employer-sponsor tax year?
NO
Can a SEP be established after the close of the employer-sponsor tax year?
YES - up until tax return due date
To claim someone as a dependent, must provide more than ____% of support
50%
If you pay more than 50% of support for a married child and they were NOT required to file a return, can you claim them as a dependent?
YES
Are distributions from a HSA that are not used for qualifying medical expenses always subject to income and penalty tax, regardless of account holder’s age?
NO - if they are over 65 years old they are not
Are FSA contributions subject to FICA taxes?
NO
Are FSAs funded through salary reductions?
YES
Can you take FSA contributions and put them towards an HSA?
NO
Can you take a loan from a 401(k) after separating from service?
NO
What is the use requirement for taking a home office deduction?
must be regularly and EXCLUSIVELY used as a principal place of business
When is a Section 2503(c) trust required to make a distribution for the minor who is the beneficiary?
age 21
Under the Fair Credit Billing Act, how much are you responsible for, per card, if your credit cards are stolen?
$50 per card (or the lesser of fraudulent charges made)
If there is a liability resulting form the operation of a motor vehicle, is that covered under any homeowners or renterse policy?
NO
Can you exchange a series EE bond for a series I bond?
NO
The Dependent Care Credit is limited to $3,000 for one dependent and $6,000 for two, and further limited to _____ for taxpayers whose AGI is above $43,000
20%
The liquidity preference theory states that the bond curve will look ______ because investors will pay a premium (lower yield) for short term bonds
upward sloping
The market segmentation theory of bond prices states that the yield curve could adopt ______, based on supply and demand
any shape
The expectations theory for bond prices states that long term rates are just a series of ______
short term rates
BOE insurance provides _____ premiums and _____ benefits (taxes)
deductible premiums and taxable benefits
Is a coin collection illiquid?
YES
If you die before an installment note is finished paying, what is included in your gross estate?
the unpaid principal balance and any unpaid accrued interest as of the DOD
A pooled income fund is like a ____ or _____ but is managed by the ______
CRAT or CRUT, but is managed by the charity
The gift value of a term life insurance policy is the _______
unearned premium at the date of gift
Section 1244 stock entitles the owner to receive up to _______ in ordinary losses instead of capital losses (per year)
$100,000
Are worker’s comp benefits taxed for federal income tax?
NO - federal income tax free
How long do you have to receive social security disability benefits before becoming eligible for Medicare?
24 months
Do MBSs provide fixed payments?
NO - any prepayments are passed on to the MBS holders
Can a pooled income fund invest in tax-free munis?
NO
Are qualified private activity bonds tax free income?
YES
What is the half year convention as it applies to depreciation?
Regardless of when the machine is put in use, you can only deduct half of the calculated annual depreciation in the first year
Can an executor make the decision to put property into a QDOT?
YES
To accomplish a goal, payments will be smaller if made at the _____ of a period
beginning
Assuming inflation, would a serial payment or a level payment be smaller to begin?
SERIAL
An annuity due means payments at the _____ of the period, an ordinary annuity is payments at the ____- of the period
annuity due - payments at beginning
ordinary annuity - payments at the end
Section 1244 Stock favorable tax treatment is only for ______ and the stock must have been acquired directly from _____; losses are limited to ______ (____ for joint filers); corporation must have received less than _____ at time of issue
1244 -
- only for losses
- directly from corporation
- losses limited to $50,000 treated as ordinary loss ($100k for MFJ)
- corp must have received less than $1m at issue
For 1202 stock, if held for ____ years, you can exclude ______ of the gain up to greater of ______ or 10x _____
5 year holding period
can exclude 100% of gain
greater of $10M or 10x ATB (both pertain to one QSBS issuer/holder)
Tenancy by entirety and community property are only available to _____
spouses
A certificant must notify the CFP board of any conviction of a crime or any professional discipline within ____ of learning of the issue
30 days
Is tax exempt income from a private activity bond an AMT adjustment? Are there are exceptions?
YES, unless purchased in 2009 or 2010
Are gift tax and gift splitting applicable to resident aliens?
YES - must pay gift tax and can split gifts if married
Disclosures regarding the roles, responsibilities, and obligations of the parties in financial planning can be made _______
verbally or in writing
If you gift property that is titled JTWROS with your spouse, does that count as a split gift? Do you have to file a gift tax return?
NO - counts as a joint gift, no gift tax return
Moderate risk for the CFP exam equates roughly to _____ in equities and ____ in FI
75/25
For stock that was subject to NUA, if it is inherited the NUA portion is considered ______ and ______
is considered IRD and DOES NOT receive a step up in basis
Anchoring is when you cannot change your point of view based on new information as it opposes your ______
initial valuation/judgement/etc. - you get stuck on your initial evaluation
Medicare should be considered as _____ coverage to your employer’s coverage
secondary
Does Medicare Part B cover dental or vision?
NO - also elective and requires a premium
An ESOP must own a minimum of ______ of company stock
30%
Are room and board, and uniforms, for a private secondary school considered eligible expenses for a CESA?
YES
If you terminate employment and have an outstanding 401(k) loan, the loan is likely repayable immediately, but should your first step be to consult the plan document?
YES
