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CFP (Self Created) > Missed Questions / Concepts (Final Review) > Flashcards

Missed Questions / Concepts (Final Review) Flashcards

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1
Q

Will the Board publicly publish a suspension?

A

It is at the discretion of the committee.

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2
Q

After one year can a certificant appeal their suspension?

A

If an order is not appealed within 30 days, an order becomes final.

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3
Q

Does the Fed set the Prime Rate?

A

No, they influence the prime rate but they don’t set it. The Prime Rate is offered by banks.

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4
Q

Is an HRA solely employer-funded?

A

Yes, solely employer funded.

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5
Q

Other than LTC insurance, what other means provides nursing home care coverage for longer than 100 days?

A

Medicaid.

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6
Q

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 ________.

A

$50,000

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7
Q

Which of the following benefits are not included under a VEBA?

Deferred compensation
Unemployment Benefits
Legal Expenses
Disability

A

Deferred Compensation

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8
Q

Are FSAs tax deductible by the employer?

A

No, they are solely funded by the employee.

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9
Q

If the CFP board denies a petition, they could allow the individual to re-apply for certificaton after a period not to exceed _____ years.

A

5

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10
Q

True or False: An EE bond held in an UGMA will qualify for federal tax free treatment if it is used for education purposes.

A

False. EEs must be owned by the PARENT to qualify for tax free treatment.

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11
Q

What is the tax treatment of TIPS?

A

The investor is taxed annually on the interest payment plus the appreciation in face value.

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12
Q

What is true about Z tranche CMOs?

A

They have the highest duration amongst all tranches.

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13
Q

Mortgage Backed Securities have the highest what kind of risk?

A

Reinvestment rate risk.

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14
Q

What features of a bond decrease its yield?

A

Put and Convertible features.

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15
Q

True or false: Preferred stock normally has a larger duration than bonds.

A

True. Preferred stock is generally riskier than bonds.

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16
Q

What is the intersection of the CML called?

A

Rf, risk free rate, 100% T bills

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17
Q

What is point B on the CML called?

A

Optimal risky portfolio / Markowitz efficient frontier.

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18
Q

What happens if the portfolio moves from the point of tangency to the Rf?

A

The amount of T-Bills in the portfolio increases.

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19
Q

What is true about the CML and the SML?

A

They are both components of the capital asset pricing model.

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20
Q

Are OIDs subject to phantom income tax?

A

No.

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21
Q

TIPS are subject to what kind of risk?

A

RIP

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22
Q

ADR dividends are declared in….

A

Foreign Currency

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23
Q

Can closed end funds trade at a premium and or discount?

A

Yes.

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24
Q

A beta of .60 is only ____% as volatile as an average stock.

A

60%

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25
Q

What occurs when a stock is split two for one?

A

Par value of the stock is reduced.

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26
Q

Are ISOs transferable?

A

No, only nonqualified stock options are transferable. ISOs can only be transferred at death.

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27
Q

Would qualified dividends be counted toward investment income with regard to writing off margin interest?

A

No, only if the client opts out of qualified dividend tax rates.

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28
Q

What is the earned income standard deduction for child?

A

Earned income + $350.

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29
Q

What noteable items do self employment taxable income NOT include?

A

Real estate income, Wages from a S Corp, K1 Distro from an S Corp, distributions of a limited partner.

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30
Q

Would health insurance premiums be deducted from gross self employment income to find net income?

A

No, health insurance premiums are deducted on the front of the 1040.

31
Q

Is there a FICA tax on earned income above 127,500?

A

Yes, at 1.45% for the employee.

32
Q

Child and dependent care credit vs. Child Tax Credit

A

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.

33
Q

What is the phaseout for adoption credit?

A

200,000

34
Q

What is the only tax credit that is refundable?

A

Earned income credit.

35
Q

What is the formula for gross profit percentage?

A

Profit / Total Contract Price

36
Q

Dates to remember for RMDs.

A

Born between January 1st and June 30th, use age 70.

Born between July 1st and December 31st, use age 71.

37
Q

How do you calculate the prorated exclusion amount for homeowners sale of property?

A

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.

38
Q

Is Cost Depletion an AMT preference item?

A

No!

39
Q

Is Cost Depletion an AMT preference item?

A

NO!

40
Q

Could 30% ownership in an S Corp be considered a passive activity?

A

Yes it could.

41
Q

What is the phaseout for deduction of losses from a real estate activity?

A

Above 150k you cannot take any of those losses.

42
Q

What are the different Tax Schedules?

A 
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
43
Q

Rental of a vacation home - Personal use cannot exceed the longer of _____ or ______

A

14 days or 10% of rental use.

44
Q

Rental of principal residence - cannot exceed _____ days in order to not incur any tax

A

15

45
Q

IRA Keys (Simple, SEP, SARSEP)

A 
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
46
Q

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?

A

No, his AGI exceeds the 150,000 phaseout.

47
Q

A child under age 18 who is employed by a parent in an unincorporated business - what is the social security and tax consequences?

A

Excluded from Social Security deductions but may be subject to income tax. Child will pay income tax at his or her own bracket.

48
Q

Are social security disability benefits taxable?

A

Yes.

49
Q

Would higher employee turnover rate decrease company contributions to an existing defined benefit plan?

A

Yes - this would increase forfeitures which must be applied in order to reduce employer contribution.

50
Q

Is a target benefit plan guaranteed?

A

No, remember it is a defined contribution plan. Defined Benefit plan is guaranteed.

51
Q

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?

A

No, you can only use the net sale proceeds to determine long term capital gain.

52
Q

A company is considering a profit sharing plan. Which investment should you not recommend?

A

Limited partnership interests (anything that has borrowed money).

53
Q

A one time election allows participants to switch from what method to draw their retirement balance?

A

Annuity or amortization method to the RMD method (no penalty)

54
Q

How does a non spousal inheritance of a 401(k) plan work?

A

The funds can either be withdrawn over a five year period or they can be withdrawn over the new owner’s life expectancy.

55
Q

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.

A

$100,000

56
Q

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?

A

No, only eligible for the $255 lump sum death benefit. Since they were a railroad worker they are not eligible to receive any SS.

57
Q

Under 401(k) hardship withdrawal rules, an employee can request an amount equal to which of the following?

A

An amount equal to elective deferrals and an amount equal to vested profit sharing contributions.

58
Q

What is RIPOOO?

A 
Relationship (define it)
Information Disclosure
Property
Obligations to ProspectiveClient
Obligations to Employer
Obligations to CFP Board
59
Q

Would a gift of 50,000 to a daughter two years before death be included in the gross estate?

A

No, the tax on the gift would be.

60
Q

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?

A

190,000. (204,000 - the annual exclusion).

61
Q

Is an open ended bond mutual fund marketable?

A

No, it is a non negotiable redeemable security.

62
Q

Would a QTIP and QDOT trust generally be considered simple or complex trust?

A

Generally they are simple trusts.

63
Q

Why would someone choose an UTMA over a 529 plan?

A

Parent will be the custodian and handle all investments in the account. 529 plan limits investment options.

64
Q

Which charitable arrangements are subject to the 5% distribution rule?

A

CRAT, CRUT, and Private Foundation

65
Q

Summary of Liability for Payment of the GST Tax

A
  • 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.
66
Q

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?

A

250,000

67
Q

Do dynasty trusts use the “conduit principle”?

A

Yes.

68
Q

Would the health status of client and family members be considered qualitative data?

A

Yes it would.

69
Q

In regards to a complaint is it required that a certificant appear before a hearing panel?

A

No not required. The certificant can request an appearance.

70
Q

Industrial Production: Coincident or leading indicator?

A

Coincident

71
Q

Is the Personal Exemption subject to phaseout?

A

Yes.

72
Q

What is the phaseout for the child tax credit?

A

MFJ above $110,000

Single File above $75,000

73
Q

Which type of life policies do NOT affect corporate AMT?

A

Cross purchase buy sell and collateral method split dollar.

CFP (Self Created) (10 decks)

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