Missed Questions / Concepts (Final Review) Flashcards
Will the Board publicly publish a suspension?
It is at the discretion of the committee.
After one year can a certificant appeal their suspension?
If an order is not appealed within 30 days, an order becomes final.
Does the Fed set the Prime Rate?
No, they influence the prime rate but they don’t set it. The Prime Rate is offered by banks.
Is an HRA solely employer-funded?
Yes, solely employer funded.
Other than LTC insurance, what other means provides nursing home care coverage for longer than 100 days?
Medicaid.
A business may deduct a limited amount of interest paid on contracts covering a “key person” to the extent that each loan does not exceed ________.
$50,000
Which of the following benefits are not included under a VEBA?
Deferred compensation
Unemployment Benefits
Legal Expenses
Disability
Deferred Compensation
Are FSAs tax deductible by the employer?
No, they are solely funded by the employee.
If the CFP board denies a petition, they could allow the individual to re-apply for certificaton after a period not to exceed _____ years.
5
True or False: An EE bond held in an UGMA will qualify for federal tax free treatment if it is used for education purposes.
False. EEs must be owned by the PARENT to qualify for tax free treatment.
What is the tax treatment of TIPS?
The investor is taxed annually on the interest payment plus the appreciation in face value.
What is true about Z tranche CMOs?
They have the highest duration amongst all tranches.
Mortgage Backed Securities have the highest what kind of risk?
Reinvestment rate risk.
What features of a bond decrease its yield?
Put and Convertible features.
True or false: Preferred stock normally has a larger duration than bonds.
True. Preferred stock is generally riskier than bonds.
What is the intersection of the CML called?
Rf, risk free rate, 100% T bills
What is point B on the CML called?
Optimal risky portfolio / Markowitz efficient frontier.
What happens if the portfolio moves from the point of tangency to the Rf?
The amount of T-Bills in the portfolio increases.
What is true about the CML and the SML?
They are both components of the capital asset pricing model.
Are OIDs subject to phantom income tax?
No.
TIPS are subject to what kind of risk?
RIP
ADR dividends are declared in….
Foreign Currency
Can closed end funds trade at a premium and or discount?
Yes.
A beta of .60 is only ____% as volatile as an average stock.
60%
What occurs when a stock is split two for one?
Par value of the stock is reduced.
Are ISOs transferable?
No, only nonqualified stock options are transferable. ISOs can only be transferred at death.
Would qualified dividends be counted toward investment income with regard to writing off margin interest?
No, only if the client opts out of qualified dividend tax rates.
What is the earned income standard deduction for child?
Earned income + $350.
What noteable items do self employment taxable income NOT include?
Real estate income, Wages from a S Corp, K1 Distro from an S Corp, distributions of a limited partner.
Would health insurance premiums be deducted from gross self employment income to find net income?
No, health insurance premiums are deducted on the front of the 1040.
Is there a FICA tax on earned income above 127,500?
Yes, at 1.45% for the employee.
Child and dependent care credit vs. Child Tax Credit
Child and dependent care only lasts until age 13. You get to take 20% of either 3,000 (1 dependent) or 6,000 (2 dependents..)
Child Tax Credit is a credit of $1,000 per qualifying child under the age of 17.
What is the phaseout for adoption credit?
200,000
What is the only tax credit that is refundable?
Earned income credit.
What is the formula for gross profit percentage?
Profit / Total Contract Price
Dates to remember for RMDs.
Born between January 1st and June 30th, use age 70.
Born between July 1st and December 31st, use age 71.
How do you calculate the prorated exclusion amount for homeowners sale of property?
Divide number of months lived in the property by 2 years. Multiply by 250,000 (filing single) or 500,000 (MFJ) to find how much can be excluded from gain.
Is Cost Depletion an AMT preference item?
No!
Is Cost Depletion an AMT preference item?
NO!
Could 30% ownership in an S Corp be considered a passive activity?
Yes it could.
What is the phaseout for deduction of losses from a real estate activity?
Above 150k you cannot take any of those losses.
What are the different Tax Schedules?
Schedule A - Itemized Deductions Schedule B - Taxable Interest, ordinary dividends. Schedule C - Business income or losses Schedule D - Cap gains or losses Schedule E - Real Estate
Rental of a vacation home - Personal use cannot exceed the longer of _____ or ______
14 days or 10% of rental use.
Rental of principal residence - cannot exceed _____ days in order to not incur any tax
15
IRA Keys (Simple, SEP, SARSEP)
No loans No life insurance Immediate Vesting 59.5 not 55 years old to avoid 10% penalty. Must take RMDs at 70.5 May not be creditor protected
Harry is 20% owner of an apartment building. His active income is $100,000. His portfolio income is 80,000. The building generates 15,000 of losses. Can he use the 25k real estate deduction?
No, his AGI exceeds the 150,000 phaseout.
A child under age 18 who is employed by a parent in an unincorporated business - what is the social security and tax consequences?
Excluded from Social Security deductions but may be subject to income tax. Child will pay income tax at his or her own bracket.
Are social security disability benefits taxable?
Yes.
Would higher employee turnover rate decrease company contributions to an existing defined benefit plan?
Yes - this would increase forfeitures which must be applied in order to reduce employer contribution.
Is a target benefit plan guaranteed?
No, remember it is a defined contribution plan. Defined Benefit plan is guaranteed.
What happens if the FMV of a stock distribution goes down, but it is still higher than the basis it was when distributed to you. Can you take the loss under NUA rules?
No, you can only use the net sale proceeds to determine long term capital gain.
A company is considering a profit sharing plan. Which investment should you not recommend?
Limited partnership interests (anything that has borrowed money).
A one time election allows participants to switch from what method to draw their retirement balance?
Annuity or amortization method to the RMD method (no penalty)
How does a non spousal inheritance of a 401(k) plan work?
The funds can either be withdrawn over a five year period or they can be withdrawn over the new owner’s life expectancy.
A company cannot grant more than _________ of ISOs that are vested in the same year to any one employee if favorable ISO treatment is desired.
$100,000
If a widowed spouse (age 60) is a railroad worker, would they still be eligible for the widow’s benefit since they are the required age limit?
No, only eligible for the $255 lump sum death benefit. Since they were a railroad worker they are not eligible to receive any SS.
Under 401(k) hardship withdrawal rules, an employee can request an amount equal to which of the following?
An amount equal to elective deferrals and an amount equal to vested profit sharing contributions.
What is RIPOOO?
Relationship (define it) Information Disclosure Property Obligations to ProspectiveClient Obligations to Employer Obligations to CFP Board
Would a gift of 50,000 to a daughter two years before death be included in the gross estate?
No, the tax on the gift would be.
Mrs Carter gifts stock worth 204k to her daughter. The stock was bought for 20k some years ago. what is the amount of the taxable gift?
190,000. (204,000 - the annual exclusion).
Is an open ended bond mutual fund marketable?
No, it is a non negotiable redeemable security.
Would a QTIP and QDOT trust generally be considered simple or complex trust?
Generally they are simple trusts.
Why would someone choose an UTMA over a 529 plan?
Parent will be the custodian and handle all investments in the account. 529 plan limits investment options.
Which charitable arrangements are subject to the 5% distribution rule?
CRAT, CRUT, and Private Foundation
Summary of Liability for Payment of the GST Tax
- If the transfer is a direct skip, the transferor pays the GST.
- If the transfer is a taxable termination, the GST is paid by the trustee.
- If the transfer is a taxable distribution, the GST is paid by the transferee.
Barb and Sue are sisters. Each owns 50% of 10 acres of land worth 500,000 in tenancy in common. What dollar amount is shown on Sue’s financial statement for this asset?
250,000
Do dynasty trusts use the “conduit principle”?
Yes.
Would the health status of client and family members be considered qualitative data?
Yes it would.
In regards to a complaint is it required that a certificant appear before a hearing panel?
No not required. The certificant can request an appearance.
Industrial Production: Coincident or leading indicator?
Coincident
Is the Personal Exemption subject to phaseout?
Yes.
What is the phaseout for the child tax credit?
MFJ above $110,000
Single File above $75,000
Which type of life policies do NOT affect corporate AMT?
Cross purchase buy sell and collateral method split dollar.
