PSA 1 Flashcards
Medicare A Skilled Nursing benefit
Benefit lasts first 100 days
HO-2
Policy payment with appreciation, depreciation, coinsurance
Actually coverd / (Should have covered * Coins) * damage – Deductible
CESA
Contrib tax deductible?
No. The benefit is earnings are not taxed
Limit on losses due to RE (active part)
Can deduct up to $25,000 against active and portfolio income
Qualified plan offering
- Simplicity
- Integration with Social Security
- Flexible funding
- Ability to invest primarily in company stock
- In-service withdrawals
- Distribution of benefits in cash if desired
- Deductible employer contributions
Profit sharing plan and
Stock bonus plan
Are CLATs revocable?
No
COBRA divorce lasts how long?
36 months
Ratio Percentage Test
NHCE % / HCE % covered
>= 70%
Average Benefits Test
NHCE / HCE avg. ben
>= 70%
Gift amount of appreciated assets
(FMV > adjBasis)
Carryover basis (incl. donee’s gift tax, if any)
Carryover holding period
Income tax treatment of involuntary conversion of real property
1033 allows deferal of gain
- If received prop > FMV, gain not recognized
- If the amount reinvested in replacement property is less than the amount realized, the realized gain is recognized to the extent of proceeds not reinvested.
Nonrecognition treatment
If converting to money, Elective
If replacement property, Mandatory
FDIC Insured Amount
One person, multiple accounts/instruments
Max $250/depositor/institution/category
- Single
- savings accounts, CDs, NOW accounts, checking accounts, and money market deposit accounts
- Joint
- All co-owners must be natural persons. Legal entities such as corpora-tions or partnerships are not eligible for joint account deposit insurance coverage.
- Each co-owner must have a right of withdrawal on the same basis as the other co-owne
- Trust accounts
- Retirement accounts invested in bank investment products
Alimony and Child Support
Incl in AGI?
Alimony
Not Child Support
Which is included in AMTI?
- Excess of depletion deduction over the adjusted basis
- Excess of fair market value above the exercise price if exercised for freely transferable ISOs
Yes, both
SEP rules: Loans?
No
Basis deduction election
up to 50% AGI
Do private annuity payments consist of consist of a partial return of basis, capital gain, and ordinary income
Yes
Taxation of Group Term Life as ER Benefit
Premiums up to the first $50,000 of face value paid by ER are tax exempt for EE.
For any amount of group term life insurance coverage greater than $50,000, the scheduled premium per $1,000 per the Uniform Premium Table is included in the employee’s W-2 income
Payment on Homeowner’s claim
Coverage / (Should have covered * coinsurance)
– Deductible
COBRA 18 v 36
18: Vol. or invol. termination
36: Death, divorce, legal separation
(neither list is nec. exhaustive)
Required account value for margin account
Loan amount + MVcurrent * Maint %, where
Loan amount = (1 - initial margin%) * MVinitial
Medicaid look-back period for assets transferred < FMV
60 months
If a transfer was made within the look-back period, the individual will be ineligible for benefits for the length of time equal to the amount transferred divided by the average monthly cost of nursing home care for the region (i.e., if the asset transferred is worth $10,000 and the monthly regional cost is $1,000, the individual will be ineligible for 10 months)
Do ISOs or NQSOs create AMT adjustment upon exercise?
ISO: Yes
NQSO: No
What type(s) of plans does PBGC cover?
Only DB (incl. Cash Balance)
How does Life Ins. proceed change if age misrep?
Beneficiary will only receive the amount of death benefit that the annual premium would have purchased at her actual age
Are gifts and child support incl. in AGI?
NO
Are these included in AGI?
Cash div
Lottery prize
Earnings
Alimony
LTCL
Yes
LTCL deducted up to $3,000
Which step most urgent to reduce Gross Estate?
- Add daughter to brokerage acct. JTWROS
- Transfer life ins. on self to daughter
- Transf. residence to an irrev. living trust
- Gift residence to daughter
Transfering life ins. will be removed from GE if survives 3 years
3-year rule does not apply to trust or gift
Brokerage acct. would not work becaus decedent supplied 100%
Charitable deduction
Basis election v FMV
Basis: up to 50% AGI
FMV: up to 30% AGI
Holding period requirement to excl. gain from TI
S 1202 stock
5 years
Do sales of vacation homes qualify for S 121 gain exclusion?
No!
Does a profit sharing plan require a J&S annuity
No
Tax treatment of interest on Treasuries
Exempt from state tax!
May private annuities be secured by collateral?
No
May you transfer from Trad IRA to HSA?
One time, up to the HSA limit
Gift of loss property
Basis for gain: Donor’s adj. basis (no gift tax!)
Basis for loss: FMV
May a recipient of a SCIN require security as collateral?
Yes
What does a SCIN need to be effective?
A risk premium to reflect risk of cancellation
At seller’s death, what happens to PV of SCIN balance?
Excluded from Gross Estate
Alternate valuation date
Two exceptions
- Residence sold prior to AVD
- Wasting assets, such as patents, annuities, and installment notes, which are valued at DOD
Which is included in AMTI?
- Net appreciation on long-term capital gain property donated to a public charity.
No
SEP rules: Mandatory ER contrib?
No
Which does the Fed control?
Prime rate
Fed Funds
Discount rate
Discount rate
Max CFP suspension period
5 years
Can CFP Board punishment be
Additional CFP continuing ed credits
Evidently
Cliff vesting permitted in 401(k)
3-year
Difference between
Government Pension Offset and
Windfall Elimination Provision
W is for Worker. Based on own comp history
GPO is for spousal AND survivor benefits
Do SEPs permit life insurance?
No
Max total contribution to SIMPLE IRA
EE Annual limit $13,500 +
2% * min(Comp, limit 285,000)
SIMPLE vesting of ER contrib
Immediate
Money purchase plan
Adjusted contribution percentage
20%
Applies only to self employed, not to their employees
Indexed Annuity
Floor, Cap rate, Participation rate
Taxation on loans from MECs
LIFO
Ord. income tax on Gain
10% early penalty if < 59-1/2
How long does Short-Term Dis. Ins. cover?
Up to 2 years
How long does Long-Term Dis. cover?
Typ. from 2 years to a spec. age, typ. 65
LTC: Chronically ill
Unable to perform 2 of 6:
Eat
Bathe
Dress
Transfer bed to chair
Toilet
Continence
ISO AdjBasis
Grant price
ISO exercise AMT adjustment
Bargain element is Positive Adjustment
What is an HO-8 policy for?
Older Victorian homes
whose replacement value greatly exceeds current value
NQSO Cashless Excercise
- Zshares * X = Ord. Income
- Need to sell Y shares to cover cost
- = Ord. Income * (1+marg)
- Y = S / {Ord. Income * (1+marg)}
- Receive Z – Y shares
May LTC be paid for by FSA?
No!
Income taxes on Split-dollar Life Ins Death Benefits
Zero!
Nonqualified annuity principal/earnings basis
LIFO if not over life expectancy
Medicare Part A premium?
Not if person or spouse has 40+ Medicare credits
Like-kind exchange
When property was for sale
Like-kind rule don’t apply!
Especially to RE dealers
Carryover basis for a gift on which no gift tax was paid
Grantor’s adjBasis (original cost less depreciation)
unless FMV is lower on date of gift
IRS six-year statute of limitations applies
If taxpayer omits an amount in excess of 25% of gross income
Combined failure to file and failure to pay penalty
Two are netted against each other
File: 5%/month
Pay: 1/2%/month
Max 5%/month
Max 25%
How much passive loss is allowed?
If disposed, all of it
If kept, netted -> prorata
excess net passive income tax applies to
S corps
Tax rate on CGs from collectibles
28%
Tax rate on CGs from commercial prop
25%
Is Section 2503(b) trust is a simple or complex trust?
Simple, becauses all income must be distributed annually
Can a non-citizen become one in order to qualify for marital deduction?
Evidently
May the executor elect to pass estate into a QDOT?
Evidently
Benefit of gifting insurance over land or cash
Adjusted taxable gift (if survives 3+ years) may be lower = Cash value at time of gift
Stock redemption buy-sell agreement
Corp is owner, pays premiums, is ben.
Why won’t putting house into irrev trust qualify for Medicaid?
60 month
Look-back period
Is transfer to a GSTT trust a direct skip?
Yes
GSTT Annual Exclusion
Lifetime exclusion allowed for lifetime skip transfers
Is QPRT eligible for annual gift tax exclusion?
No! Remainder interest, not present interest
QPRT qualify for Ch. 14 Zero Valuation Rules?
No, because grantor continues to reside
Private annuity: Secured by collateral?
No
Does a life estate coupled with a limited power of appointment qualify for the marital deduction?
No, because it is a terminable interest
Is a corporate recap a substitute for buy/sell agreements?
No, it is a generation transfer method
Does GE include irrev. trust?
No!
Difference between
Qualified disclaimer and
Election against the will
QD: made by heir
EAW: Made by disgruntled spouse
Gift recipient’s basis
when gift tax was paid
Grantor’s adj. basis +
Grantor’s gain / FMV * Gift tax paid
What is wrong with a grandparent-owned 529?
Although excluded from assets for FAFSA, while the child is attending college reduce future financial aid determinations by 50% two years after distribution
May a trust w/ spendthrift clause serve for educ.?
Yes
Disadv. of UTMA for educ
- Assets are included at the higher student rate when determining EFC
- Earnings within the account may be taxed at the parent’s marginal tax rate
- Account ownership automatically transfers to the child when the age of majority is attained
- Funds in the account are not portable and are unable to transfer to a different beneficiary
Whose asset is an UGMA?
Child’s
Is UGMA income tax-free?
No
How long receive SS Disability to qual. Medicare?
24 months
COBRA after term. gross misconduct
None for EE
None for childre
Coverage C ins on residence at another location
50%
Prop at that location: 10% cov, or 5%
Limit on collecting when contributory negligence
$0!?
Max salary deduction for Dependent Care FSA
$5,000
Form ADV
Part 2A
Prior to or at time of contract,
Must provide or
Must provide information on
