Post Study Cards Flashcards
What does it mean when npv equals zero?
Interest rate is same as required rate of return. Good investment.
Which calculations are always in begin mode?
One college tuition two retirement benefits three family needs
Which calculations are always in end mode?
Retirement plan contributions, Bond interest, mortgage payments
What does it mean when npv is below required rate of return?
Bad investment.
Child tax credit
Child tax credit of $2,000 for each qualifying child under 17. Credit phased out above $400,000 Magi mfj and 200,000 single. 1400 per child refundable credit
Cfod tcja
To be replaced
Child Care Credit
Children under age 13, non-refundable 20% of expenses paid for care of a dependent that allows the taxpayer to work in an income. Qualifying expenses limited to $3,001 dependent 6,000 two or more
Qualified adoption expenses (4)
Eligible children 17 or younger any age was a US citizen or resident alien, who has special needs court costs attorney fees cost to adopt a foreign child no surrogate no spouse’s child claim in the year of adoption finalized
Elderly and disabled credit (3)
Person must be age 65 permanently and totally disabled
Foreign tax credit
Credit for foreign tax paid
Net operating income calculation
Potential rental income minus collection in vacancy costs minus operating expenses
Installment sale gain calculation
Determine gain recognized in year of sale and each subsequent year. Profit over total contact price equals gross profit percentage. Long-term capital gains
YMCA calculations premium Bond
To be replaced
YMCA calculations discount Bond
To be replaced
Question gp-9. Steve and Barb’s budget outflows exceed their income and they want to retire now period what option would you recommend they consider?
Obtain a reverse mortgage
What is irr?
It’s the rate at which the present value of the future cash flow equals the cost of the investment
What do we know when irr is greater than expected return?
The investment is good
What keys are important in irr?
CFO and cfj
Devaluation
Lowering of value of a currency relative to another country’s currency
Reevaluation
An increase in the value of a currency relative to another country’s currency
What variable does rho signify?
Correlation coefficient
What is correlation coefficient?
Tb replaced
What number are two perfectly positively correlated securities?
1.0. this means they move exactly together
What is the number for two perfectly negatively correlated securities?
-1.0. they move exactly oppositely. This would imply full mitigation of risk
How do you get the correlation coefficient mathematically?
Divide the covariance number into standard deviations of security one times standard deviations of security 2
CV
Coefficient of variation, or risk per unit of expected return
Standard deviation definition
Measures variability of returns. Measures total risk
What does beta measure?
Volatility of returns in the portfolio and measure of systematic risk
Mnemonic for how to use duration to manage Bond portfolios
UPS f a l l e n
If rates will rise, shorten duration
If rates will fall, lengthen duration
HALE
Health education, law, engineering. personal Service Corp.
Where is taxable income or loss reported for a sole proprietorship?
On schedule c, loss carries to the first page of the 1040
What form is the partnership tax return?
1065, but for information purposes only
What is the IRS section concerning subchapter s corps?
1120s
What type of interest can be deducted without any limits?
Sole proprietor loans, on schedule c
How is a corp shareholders adjust their basis each year?
By the profit or loss for their share for the year
Is the owner’s salary in an s corp subject to FICA?
Yes, FICA and futa
Section 1231
Games over and above macrs, to appreciation
Section 1244
Governs stock in an s corp
Section 179
Tbr
Section 121
Governs capital gains in your personal residence
Section 2032a
Governs valuation of a closely held especially land-based business, for a state purposes
Section 403b
Governs retirement plan for schools school districts and nonprofits 501c3s
Section 6166
Governs paying for estate taxes with installment sales when closely held businesses especially farming and ranching are involved
Section 1035
Governs exchanges of insurance products
Section 1031
Governs exchanges of like property, especially real estate
Section 303
Governs arrangements for financing from shares of a closely held business especially farming and ranching
SPAG
Special purpose rbr
What’s a disqualifying disposition?
Ex and sale within 1-2 years iso
What is the stepped up basis at death in community property?
Jointly owned assets step up for both shares
What is cost recovery recapture?
It means that your income recaptures the depreciation and that now becomes income when you sell an asset? BUT does your basis change? And does this matter for individual taxes? Of course you don’t usually take deprec unless you own real est
What are other names for the bypass trust?
B trust, unified credit shelter trust, nonmarital trust, family trust, applicable credit amount
Why bypass trust?
Usually 11,580,000, equal to exemption. To give decedent postmortem control over the property. At surv spouse death, remaining assets pass estate tax free to the remainder bennie
QTIP
Qualified terminal interest property trust
Q-tip trust simple or complex?
Simple
What does q-tip trust do?
Decedent wishes to provide surviving spouse with stream of income for life yet also wishes to qualify property for marital deduction.
must be included as an asset in the gross estate of surviving spouse
Keys to a q-tip trust (l a m e)
Lifetime income interest for the spouse
Annual payments to the spouse
Mandatory payments to the spouse
Exclusively for the spouse
What are personal service corporations a subset of?
C Corp
