QBank TakeAways Flashcards
CPF Numbers To Remeber
25,000 Allowable Loss
Real Estate loss deduction for active participant
Full $25K allowed if MAGI is below $100K
Phaseout for MAGI between $100K - $150K
[(150 - MAGI)/$50K] x 25K
$100K - %150 K Phaseout
Real Estate loss deduction for active participant
Full $25K allowed if MAGI is below $100K
Phaseout for MAGI between $100K - $150K
[(150 - MAGI)/$50K] x 25K
500K (MFJ) / 250K (Single) Allowable Exclusion
Sale of primary residence (sec 121)
Allowable Exclusion - $250K (If stayed for 2 years)
Prorated Exclusion for less than 2 years - (# of months stayed / 24) X 250K
Usage & Ownership Test for Sec 121
Both spouses must meet the usage test AND One spouse must meet ownership test
403(b) Investment Options
Can invest in Sponsored Mutual Funds or Annuities
SIMPLE IRA Eligibility - Earning Requirements
Must have earned $5K in last two years and reasonably can expect to earn $5K in current year
Age Requirements for Kiddie Tax
under age 19 or
under age 24 if full-time student
A-Trust Features
Qualifies for Marital Deduction = Yes
Surviving spouse has power of attorney = Yes
Includes in Decedent’s Estates = NO
Included in the Surviving Spouses Estates = Yes
DNI Taxation
With DNI, bene will be responsible for taxes on LESSER of DNI or amount required to be distributed according to trust document.
How is income from 2503(b) or 2503(c) trust taxed?
Income from minor’s trust is taxed UNDER KIDDIE TAX rules
QPRT Basis
Heirs acquire the carry-over basis (original basis of the grantor) + Any improvements made
TIP Estate Tax Consequences
RECEIVING Spouse (donee) Will NOT include property in their gross estate at death
GIFTING spouse (donor) will REMOVE the property from their estate
TIP Gift Tax Consequences
TIP = GIFT
DONOR spouse = CANNOT gift-split
DONOR spouse = CANNOT take marital deduction
DONOR spouse = CAN take annual exclusion for present interest gift
Which properties are NOT includable in the gross estate?
Gifted property within 3 year of the death of the donor
UNLESS - donor has RETAINED interest in life estate, re-visionary interests or revocable trust and life insurance policies owned by the insured
What is the amount of tax due for assets transferred into QTIP trust through QTIP election?
no tax due as assets transferred via QTIP election are considered marital deductions which are unlimited.
What does grantor of QPRT receive in exchange for transferring the property into the trust?
access to the property and possession of the property
3 Types of generation-skipping transfers (GST)
Taxable Distributions
Taxable Termination
DIRECT skip
GST - Taxable Distributions
Any distribution of income or corpus from a trust to a skip person that is NOT subject to estate or gift tax.
GST - Taxable Termination
The termination by death, the lapse of time, release of power, or otherwise of an interest in property held in a trust resulting in skip persons holding all the interests in the trust
GST - Direct Skip
A transfer subject to an estate or gift tax made to a skip person.
Tax-exempt Gifts
Gift made DIRECTLY to educational institution for TUITION ONLY
Gift made DIRECTLY to a medical provider/institution for an individual’s medical expenses
TIP Exceptions
Marital deductions are NOT available for TIP
Exception: Marital deductions are allowed ONLY IF
(1) Spouse is given a life estate in trust and is given a general power of appointment over the trust corpus.
(2) Q-TIP Election is made by donor or executor
Taxable gifts and gift tax
Taxable Gift = FMV of property or Cash value of the gift - $18K Annual Exclusion
Gift Tax = 40%
Total Gift Tax Liability = Taxable Gift X Gift Tax
Basis & HPR of appreciated property Gift
DONEE Basis = Donor’s basis
DONEE HRP = Donor’s HPR
Basis & HPR of loss property gift
IF subsequently sold at a loss (Less than the FMV at the time of the gift)
DONEE basis = FMV at the time of the gift
DONEE HPR = HPR begins at time of the gift
IF subsequently sold between FMV of gift and Donor’s Basis (in between) = No gain or loss to Donee
IF subsequently sold between ABOVE FMV of gift:
Donee’s basis = donor’s basis
Donne’s HRP = donor’s HPR
What are the gift tax return filing requirements for gift splitting?
The donor spouse files the gift tax return if split gifts are less than the annual exclusion; the other spouse shows “consent” on Form 709.
Bond price sensitivity to changes in the interest rates
Bonds with SHORTER maturity and HIGHER coupons are LESS sensitive to interest rate changes
Factors that influence an investor’s capacity for risk are?
Time Horizon
Liquidity Needs
Total Investable Assets
The probability of a return falling within +/- 1 SD of the average is
68%
The probability of a return falling within +/- 2 SD of the average is
95%
The probability of a return falling within +/- 3 SD of the average is
99%
When you want to profit from appreciation of a given stock AND you have no need for current income, what options strategy should be used?
Buy a call
(Right to buy stocks at an EP and you want to buy a low EP < MP = bullish)
Examples of higher risk investments
Common and preferred stock
Junk bonds
Options, futures and forwards
Small-cap and growth-oriented funds
What strategy to use if you are subject to AMT in the current tax year
Accelerate income into the AMT year
Defer tax deductions until a regular tax year
items of income in respect to decedent (IRD)
Defered Annuity
Immediate Annuity Period Income
ER Qualified Retirement Plans - 401K, TSA, Company Pension Plans
IRAs
EE Bonds
Salary, Bonus, Commissions, Rental income
Lottery Winnings, any other income
(Capital Assets - bank accounts, CDs, stocks, bonds, mutual funds, real estate and business assets are not items of IRD)
ADL for qualified LTCi Claim qualification
BED (Bathing, Eating, Dressing)
COT (Continence, On-off the Toliet, Transfering)
(Walking is NOT an qualified ADL)
If ____ % of REIT Income is distributed to sharedholders, that income is tax free to the REIT
90%
At least _____ % of REIT’s assets and income must be derived from real estate equity or mortgages
75%
Which type of life insurance policy provides cash value subaccounts NOT subject to insurance company’s creditors in the event of the insurance company’s bankcrupy?
Variable Universal Life Insurance Policy
What tools Fed uses to manipulate the Money Supply?
Discount Rate
Reserve Reqs
Open Market Activities (Buy/Sell Securities)
Statistical measure that is used to quantify NON-DIVERSIFIABLE risk
Beta (NON-DIVERSIFIABLE = SYSTEMATIC)
(Std Deviation is used to measure diversifiable riks)
Avg tax rate is always _______ than marginal tax rate
LOWER Than
IRA Distribution Form & Partial Withdrawl from Annuity
1099-R
Minimum vesting schedule for cash balance plan
3-yr cliff
Which ER sponsored retirement plans are covered by PBGC?
Cash Balance Pension Plan
Traditional Defined Benefit Pension Plan
(Only DB Plans are covered by PBGC)
Accounts that CANNOT pay for NON-Tuition K-12 expenses
529 (upto $10K in TUITION expenses for K-12 students can be distributed from 529. NON-Tuition K-12 expenses paid from 529 account are NOT eligible for preferential tax treatment)
These accounts CAN pay for non-tution K-12 expenses: Coverdell, UGMA, UTMA
Max Period for RMD for inherited traditional IRA
For anyone above 21, End of 10 yr following decedent’s death
______ the maturity of a bond and ______ the coupon, the LESSER the sensitivity of the bond’s price to interet rate changes
SHORTER the maturity and HIGHER the coupon, the LESSER the sensitivity of the bond’s price to interest rate changes
Measure of Risk that includes SD
CML (Capital Market Line) (SD = total risk)
(SML, CAPM, Treynor Ratio use Beta as mesure of risk)
How much of the Traditional IRA Contribution is deductible when 401K contribution is maxed for the year?
If you are an active participant in an employer-sponsored retirement plan, IRA contribution deduction depends on the MAGI Phaseout
