Practice Question Blocks Flashcards

Question

Another name for a bypass trust?

Answer 1

Family Trust, Unified Credit B Trust Credit Shelter

Answer 2

Always a gain above basis, as Ordinary Income.

Answer 3

He can file a refund claim on Form 1040X within three years from the time his original return was filed, or within two years from the time he paid the tax for that return.

Answer 4

COST. No profit is included in the deductible amount.

Answer 5

I. It is a supplemental executive retirement plan. II. It is an informally funded plan to provide benefits that greatly exceed those provided by a normal retirement plan. III. It is also called a "top hat" plan. (ALL CORRECT)

Answer 6

The tax deduction for a work of art created by the taxpayer is limited to basis. $25

Answer 7

They're now taxable (used to be)

Answer 8

Which are capitalized, and which are expenses? Screen and Law Service are expenses. The other 3 are all capitalized (even though Replaced / Installed are different)

Answer 9

Section 1244 allows for a $100,000 ordinary loss for married filing jointly and a $50,000 ordinary loss for single persons. This only is used for a small closely held corporation, with this election. Losses are only used when the company goes out of business.

Answer 10

None of the above! Answer: for single is $50,000 ordinary loss plus $3,000 capital loss and a $67,000 carry forward.

Answer 11

LOOK IT UP. Basically, QDRO does NOT apply to IRAs. Don't forget that at least.

Answer 12

The cost of insurance affects the premiums paid . $150,000 - 10,000 = $140,000 basis. Mr. Golden will have to recognize income of $260,000 (400,000 - 140,000). The income is characterized as ordinary income to the extent the cash value exceeds the premiums paid ($175,000 - 150,000) or $25,000. The balance will be treated as capital gains $260,000 - 25,000 or $235,000. HINT: With this type of question always back into the answer. Life Settlement Trick: LOOK FOR CAPITAL GAINS

Answer 13

If interest rates rise, interest rate risk causes the value of the bonds to drop, but the client can earn more on coupon payments that are reinvested. If interest rates decline, interest rate risk causes the value of the bonds to rise, but the client will earn less on coupon payments that are reinvested. The typical method of immunizing involves assembling and appropriately managing a diversified portfolio of bonds.

Answer 14

The ring is only covered if its disappearance is due to theft. The dollar amount shown is not important. See Insurance prestudy lesson 3. It is a concept question (theft). There is no coverage unless a theft occurred. The theft must be reported to the police. It is a common sense question/answer. Some policies cover jewelry up to $5,000.

Answer 15

Rotary is a not-for-profit. It isn’t a public or private charity. The Rotary Club would have to obtain IRS approval to receive tax deductible contributions.

Answer 16

If you do freelance work as an independent contractor, you are self-employed and use a Schedule C to file. John will have to pay self-employment tax. He must file a Schedule SE if net earnings are $400 or more.

Answer 17

II and III are correct. Statements I and IV are wrong because the only parties that can contribute are the eligible person or the employer – but not both in the same year. Contributions by the eligible individual go on the front of the 1040 (adjustments to income). (Need more MSA information)

Answer 18

$500 Actual cash value is the current replacement value of $1,500 less depreciation of 10/15 of the current replacement value of $1,500 ($1,000) or $500.

Answer 19

NO LTC PRemiums.

Answer 20

Books, tuition, course-related fees, equipment, and supplies that are required for courses are tax-free. Room, board, and incidental expenses are taxable. The same is true for a graduate student who is paid a stipend for teaching. A scholarship or fellowship given to a degree candidate who agrees to work for the federal government is taxable (Item IV).

Answer 21

QDROs only apply to qualified plans not IRA accounts. Yes, an IRA break-up can be part of the divorce settlement but a QDRO does not

Answer 22

The election generally allows an executor to elect to value a farm for federal estate tax purposes based on actual current use, as opposed to the fair market value of the property if it was sold for development purposes. Other: - Base amount is 750K (indexed, over 1MM) - Decedent must be US Citizen or Resident - Qualified Heir must be a US citizen. - 5/8 years prior to death must have materially participated in farm operation. - 10 years after!

Answer 23

YES. Nothing says it has to be for publically traded stuff.

Answer 24

The Practice Standards establish the level of professionalism expected of CFP Board designees engaged in personal financial planning.

Answer 25

Participation eligibility in a qualified plan is contingent on employee status. (Sole-proprietors and partners may establish their own qualified plan.) An Independent contractor may participate in his own qualified plan but may not participate in another entity’s qualified plan unless he is also deemed to be a regular or “common law” employee of that entity.

Answer 26

As long as it doesn't discriminate in FAVOR OF Non-HCE participants (AKA, if only rank/file receive commissions, it's a problem)

Answer 27

The financial planning process steps may occur in connection with other activities. Examples include gathering client data as part of a suitability analysis. Question idea came from CFP Board's Standards of Professional Conduct "frequently asked questions".

Answer 28

When the plan administrator has approved the QDRO that has been entered with court and signed by the judge. The best practice is that a QDRO is entered with the court at the same time as the judgment of divorce and qualified by the plan administrator.

Answer 29

She can Elect against the will. Allows the partner to choose whether to take 1/2 of his property outright, or to take the benefits provided under the will.

Answer 30

SEP: By the due date of the business tax return, including extensions SIMPLE: On or before the first date by which a contribution is required to be deposited QUALIFIED: Within the tax year for which the employer wishes to take the tax deduction

Answer 31

If the income is included in the gross estate, the estate tax attributable to that income item is generally deductible by the recipient of the income. Look THIS SHIT UP.

Answer 32

Amounts up to 100K do not affect government benefits Disability must have occured before age 26 Can gift up to exclusion. LOOK UP MORE

Answer 33

The Tax Act 2001 Act added a fringe benefit called "employer provided retirement planning services." An employee and spouse can exclude from their income the value of certain retirement planning services provided by qualified retirement plans. The exclusion will not be available to highly compensated employees unless the services are also available to "each member of the group of employees."

Answer 34

It's not diversified! Use Sharpe (because St. Dev. has both Systematic and UN systematic risk, which hasn't been diversified away.

Answer 35

Excess qualified residence limitations

Answer 36

You can't create a loss. You deduct up to profit, and the remainder is done using MACRs. There'a 1MM limit on 179!

Answer 37

As long as the exercise price is at least 110% of the FMV of the stock at grant date and the options vest within 5 years, a greater-than-10% shareholder may be granted ISOs. (WTF) Also, ISOs cannot be transferred by the option holder during his/her lifetime. It's a disqualifying event (separate topic)

Answer 38

Yes, in the second post-separation year To determine excess alimony, note the difference in the payment between years 2 and 3. Under the Internal Revenue Code, the excess alimony payment for the second year is the amount that exceeds the payment in the third year by more than $15,000. The excess is $5,000 [$30,000 - $10,000 + 15,000)].

Answer 39

Form 709 is the gift tax form! 706 is the Estate Tax form.

Answer 40

Its calculation discounts unequal cash flows at a required rate of return less the initial cost of an investment. (can use both positive and negative cash flows)

Answer 41

Sort of. Depreciation deduction can offset rental income, on an asset that is appreciating in value. An immediate annuity doesn't actually defer taxes (you just start paying immediately.

Answer 42

That way the gift / growth asset's basis is the donee's purchase price instead of a "Carry-over" basis (from giving the stock itself) This is advantageous if your goal is to provide the greatest benefit to the recipient.

Answer 43

100% or 55K (Maximum). However, only 25% of employee pay is maximum deductible. ?

Answer 44

Could be 25%! for recapture amount.

Answer 45

IT is PUBLIC. Viewed on website. Private letter of censure is a soft discipline form.

Answer 46

Only if it's earnings / conversion assets which have met the 5 year rule.

Answer 47

NO. You pay it off faster, but the payment is the same unless you refinance.

Answer 48

If a self-employed owner, remember to subtract 50% of .1413 self employment tax! (knucklehead!)

Answer 49

Credits are best for low earners / low marginal tax rates. Deductions are better for high earners!

Answer 50

YES. You can still contribute your 2K / year, but you'll have to use part of your lifetime exemption.

Answer 51

IT's COLLISION. Other cars and stationary objects are both collision.

Answer 52

If you transfer / gift a policy to the ILIT, and die within 3 years, it's included in your estate!

Answer 53

Start with the B/d compliance department before notifying FINRA or the SEC.

Answer 54

Alice's basis will be increased by the gift tax paid by her mother that is attributable to the appreciation. Basis to a donee is increased by the gift tax paid byt he donor that is attributable to the appreciation of the gift. Alice's basis in the property is its FMV as of the date of the completion of the gift..

Answer 55

There is no 1,000 ERISA requirement for participation in a 403(b) program!

Answer 56

For a charity, taking care of children, etc. At the cost of the dresses to Freida's Frocks plus one-half of its mark-up to retail pricing

Answer 57

within 10 days.

Answer 58

For Loss gifts with double basis, the donor's holding period DOES NOT carry-over. For appreciated property gifts, the basis carries over.

Answer 59

Warrants can be attached, adding long-term value to the preferred stock. 50% of the dividends received by a domestic corporation are tax exempt.

Answer 60

Part A will cover home health visits that are part of a treatment plan and up to 100 days in an extended care facility for rehabilitative purposes. The patient must pay the hospital cost for the first 3 units of blood in a calendar year or have blood donated by the person or someone else.

Answer 61

Computer software will only qualify if it is educational in nature. Uniforms are covered but not intramural sports equipment.

Answer 62

It is an election to expense to tangible personal property (1245).

Answer 63

The right to income limited to HEMS is not a right to all income from the trust as would apply with a QTIP trust. Also, the QTIP cannot use the $11,180,000 exemption.

Answer 64

It's Required Return - Risk-Free Rate (BEFORE multiplying by Beta)

Answer 65

The return due in the year after death is the return for the year in which the husband died. Martha may file married, jointly or married, separately. She is not eligible to file as a qualifying widow until the year after Alex died (the next year). Martha may file as a qualifying widow if she meets one of the following four tests. 1) She maintains a home 2) She has a dependent child 3) She filed a joint return the prior year 4) She did not remarry. Martha may also file as head of household, but she would have to have children actually living in the home.

Answer 66

Under Medicare Part B both annual flu shots and pneumonia shots are covered at no cost to the patient.

Answer 67

Unlike the CRT (which requires a 5% minimum annual distribution to the grantor), there are no minimum or maximum required distribution percentages with a charitable lead trust. It is generally permissible to select any percentage, including less than 5%.

Answer 68

Price volatility!

Answer 69

A participant loan enables Josh to receive cash up to $50,000 representing 50% of his account balance. He must repay the loan within 5 years.

Answer 70

Although Mr. Carlisle is not a U. S. citizen any real property he owns that is situated in the U.S. as well as any U.S stocks he owns may be subject to federal estate tax in the US. A QDOT is appropriate when the transferor is a U.S. citizen. Ronald is not a U.S. citizen.