More Complicated Stuff Flashcards
Describe Unit Investment Trusts.
Passively managed, self-liquidating, usually holding bonds, but can hold equities.
What is the difference between open-end and closed-end mutual funds?
Closed-ends have a fixed # of shares; open-ends create new shares as new $ becomes available.
What are 12b-1 fees for?
Marketing expenses
Are closed-end funds actively managed? Are they traded on 2ndary markets?
Closed-ends are actively managed and do trade on secondary markets.
If you have LT and ST cap losses in the same year that, combined, exceed the $3,000 limit, how are they taxed?
The ST lost is deducted first. The carryover is likely to be LT.
What is the intrinsic value of a stock in fundamental analysis?
The discounted value of its future dividends.
What are bottom up and top down investment strategies?
Bottom up starts with individual companies, goes to the industry in general, and then to the economic climate.
Characteristics of preferred stock.
- Combination equity and debt instrument.
- In liquidation, takes precedence over common stock
- No voting rights
- No maturity date
- Riskier than bonds b/c bonds are a legal obligation, and take precedence over preferred stock in bankruptcy.
What is the “cumulative feature” of preferred stock?
If dividends are not paid on stock, the ones due preferred shareholders accumulate and no other dividends can be paid until they are paid.
What type of owner benefits the most from preferred stock?
The corporate owner because they get a DRD (dividend-received-deduction) for taxes that increases with their ownership %
Section 121 is the exemption for gain on selling a private residence ($250k single, $500k MFJ). How do you qualify for it? What if your move is job related?
The residence has to have been your primary for 2 of the last 5 years. If your move is job related, take the fraction of the last 24 months that you owned and lived there. Multiply that fraction by the exemption you’re entitled to.
Can you get a partial exclusion under 121 (sale of personal residence) if you’re moving for the health of your pet?
No. But you can if you’re moving to a job, moving for your own health, or moving b/c you’re bothered by airport noise.
Does the yield curve describe interest rates on government debt?
Yes.
What is 5-year MACRS property?
What is 7-year?
Computers, autos, and trucks are 5-year.
Office furniture is 7-year.
What is the MACRS schedule for residential real property? For non-residential real property?
Rental houses = 27.5 years.
Commercial property = 39 years.
What’s the difference between time-weighted and dollar-weighted returns? What’s the similarities?
Time-weighted return calculates based on only the initial purchase (+ dividends). It ignores subsequent purchases. Dollar-weighted return includes subsequent purchases (and divs.) Both are CFJ calculations.
What is the better measure of a fund manager’s performance: time-weighted return, or dollar-weighted return?
Time-weighted is better because it focuses on the investments cash flow. Dollar-weighted focuses on the client’s cash flow.
Is uncollected rent deductible?
No!
Is an S-corp a pass-thru entity?
Yes.
When do limited and general partnerships automatically dissolve?
When they have more than a 50% turnover in a 12-month time.
