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CFP - Review Cards > Question Bank Misses > Flashcards

Question Bank Misses Flashcards

From the final 6 quiz blocks

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CFP® flashcards
1
Q

How do you determine excess alimony

A

it’s the amount that exceeds the payment in the following year by $15k (or something like that)

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2
Q

split gift things to remember

A

Form 709
both spouses must file

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3
Q

Joint Life Distributions

A

Exception if employee’s SOLE BENEFICIARY is their spouse and the spouse is more than 10 years younger
they can use the joint life and last survivor tables (which have a longer distribution period)

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4
Q

Name the qualified plan types

A

Money Purchase pension plan
target benefit
profit sharing
profit sharing 401k
stock bonus/esop

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5
Q

Non qualified plans (hint: theres 5)

A

SEP
SIMPLE
SARSEP
Thrift or savings plans
403b

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6
Q

What is Net Present Value

A

it’s a calculation that discounts unequal cash flows at a required rate of return less the initial cost of the investment

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7
Q

add back items for AMT

A

property, state, city/income, and sales taxes
incentive stock option (bargain element)

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8
Q

preference items for AMT

A

IPOD
Excess INTANGIBLE drilling costs
Private activity muni bond
Oil and gas percentage depletion
Depreciation

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9
Q

Strategic vs Tactical asset allocation

A

think short term for tactical asset allocation

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10
Q

General Roth IRA withdrawal rules

A

Retirement 6-8

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11
Q

If interest rates are expected to decline what bond feature should you look out for?

A

call protection (generally 10 years)

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12
Q

If interest rates are expected to rise, what bond feature should you be on the lookout for?

A

a put feature

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13
Q

Basis of charitable income tax on stock

A

the charitable income tax deduction is generally based on the FMV of the stock as of the date when its transferred to charity

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14
Q

What are the four categories of college funding/savings vehicles that can only be used individually

A

AOC
LLC
Coverdell
529

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15
Q

collision vs comprehensive on PAP

A

Collision - “covered auto or its impact with another vehicle or object”
Other than collision -
flood, earthquake, vandalism, explosion, etc

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16
Q

if a disgruntled client worked with a b/d where should they complain?

A

they should begin the complaint process through the b/d compliance department
if they’re unresponsive or they disagree with each other, arbitration should be pursued through FINRA

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17
Q

License for ETFs

A

ETFs are traded without prospectus, therefore you must have a 7

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18
Q

basis, gifts, and gift tax paid

A

basis to a donee is increased by the gift tax paid by the donor that is attributable to the appreciation of the gift

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19
Q

how much of the child tax credit is refundable?

A

$1,600 per child

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20
Q

QBI below or above the line

A

QBI is below the line

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21
Q

QBI phase out for personal service business

A

phased out at $483,900

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22
Q

financial planning vs financial advice

A

Planning is comprehensive
advice is generally stand alone

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23
Q

ARM base rate

A

SOFR (Secured Overnight Financing Rate)
this is the base rate used for many loans and financial derivaties

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24
Q

501c9 - VEBA
What benefits can an employer fund?

A

death benefits
medical expense beenfit
disability benefits
legal expense benefits
unemployment benefits
child care benefits
severance benefits
education benefits

NOT Deffered compensation
Not retirement

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25
Q

Coverdell ESA qualified expenses

A

MOST things are covered, to include:
tuition
fees
tutoring
special needs services
books
supplies
room and board
uniforms
extended day programs
computers/technology

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26
Q

what is provisional income

A

income (MAGI) plus half of their social security benefits

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27
Q

is deferred comp considered compensation for DB calculations?

A

Deferred compensation is not treated as compensation until it is constructively received

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28
Q

what type of trust is required to distribute its income annually?

A

simple trust

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29
Q

when in doubt you should _____ your client

A

EDUCATE

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30
Q

What happens if a grantor of a QPRT dies during the retained interest term? (question 16)

A

the grantor’s estate is left with no greater tax liability than had the QPRT not been established

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31
Q

MEC requirement

A

entered after June 21, 1988
Fails to meet the 7 pay test

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32
Q

Taxation of distributions under a MEC

A

“interest-first” rule
before 59 1/2 = 10% federal penalty tax
DB is excludable from income

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33
Q

what is the 7 pay test?

A

excess premium paid in the first seven years

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34
Q

Elaborate on Section 415

A

Section 415 of the Internal Revenue Code limits the annual addition to a maximum of 100% of compensation or $69,000.
The company may contribute and deduct more than 25% of salary in addition to the elective deferral of an individual employee/participant (not to exceed $69,000), providing that the plan deduction for total includible compensation does not exceed 25% (elective deferrals).

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35
Q

ISO taxation

A
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36
Q

Appeals of DEC rulings

A

ANY ruling can be appealed within 30 days of notice of the adverse ruling by mail
Must submit a petition for appeal

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37
Q

Summary of liability for payments of the GSTT

A

direct skip = transferor pays
taxable termination = trustee pays
taxable distribution = transferee pays

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38
Q

integration with Social security

A

Target benefit
money purcahse
profit sharing
stock bonus
SEP

NOT ESOP or SIMPLE

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39
Q

ER contributions for group disability (taxation)

A

Employer contributions for group disability insurance are generally treated as an ordinary and deductible business expense.
The premiums will result in no taxable income to the employee.

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40
Q

risk of zero coupon bonds

A

NO reinvestment rate risk

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41
Q

Can standard deviation be negative

A

No

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42
Q

how many years can be used for the calculation of standard deviation on a stock?

A

there is no limit

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43
Q

1031 vs 1035 exchange

A

1031 is property
1035 is insurance

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44
Q

carryforward of charitable income tax deductions

A

the NEXT 5 years or until death

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45
Q

treynor vs sharpe (when to use each)

A

if R2 is >60 look for the highest positive alpha
If no alpha then look for the highest treynor
If R2<60, look for the highest sharpe

46
Q

charitable bargain sales

A

the basis of the property sold to the charity for less than FMV must be allocated between the portion of the property “sold” and the portion “given” to charity
(proceeds/FMV) x basis

47
Q

what type of Employer group coverage is not tax deductible by the employer

A

Code section 125
Flex spending accounts -these are EE funded

48
Q

company borrowing against cash value on key employees

A

a business may deduct a limited amoutn of interest
each loan can’t exceed $50k

49
Q

uninsured motorist is WHAT

A

liability protection

50
Q

IRA RBD

A

in any IRA-type of arrangement, the RBD si always 4/1 following the calendar year in which you turn 73
EVEN if you continue working

51
Q

dollar limit that can be converted from a traditional to a roth IRA

A

TRICK. there isn’t one

52
Q

what types of gifts do you not need to disclose to clients?

A

minimal gifts like fruit and candy

53
Q

Taxation of dividends in a MEC

A

become taxable when BORROWED or withdrawn

54
Q

AOC vs LLC

A

AOC is per eligible student per year
AOC can’t be used if you have a felony drug conviction

55
Q

What does NPV ultimately tell you?

A

NPV tells us whether the client achieved their required rate of return
when its NPV is zero, the investment met the buyer’s required rate of return
AN investment can be profitable even if its NPV is negative

56
Q

basis for an equity owner in an S corporation

A

capital contributed to the business and personal loans to the busienss
NOT third party loans EVEN if the owner assumes personal liability for the debt

57
Q

where do you add taxable gifts?

A

to the TAXABLE ESTATE, not the gross estate

58
Q

general powers of appointment if you die with them

A

property subject to general powers of appointment are included in the gross estate of the holder of that power

59
Q

monetary policy refers to activities in which the federal reserve engages to influence what?

A

money and credit

60
Q

hardship loans

A

are NOT for IRAS
there is no such thing as a hardship withdrawal on an IRA

61
Q

SEC registered advisors with at least $100M have to file ADV updates within ___ days of the end of their fiscal year

A

90

*remember, if they are registered with the state (smaller firms) this is regulated at the state level

62
Q

gross estate

A

Gross estate= total FMV of all property and interests “owned” or controlled by the decedent at the time of death

63
Q

taxable estate

A

adjusted gross estate, less the maritial and charitable deductions

64
Q

tax base

A

the taxable estate plus adjusted taxable gifts (the amounts exceeding annual gift tax exclusion)

65
Q

what is time weighted return

A

geometric mean

66
Q

why would you pick time weighted return over dollar weighted return?

A

to evaluate the performance of the portoflio manager

67
Q

Key characteristics of profit sharing plans

A

can be integrated with social security
ER can only contribute and deduct up to 25% of the overall payroll, but the individual participants could receive more than that
can be age weighted
contributions can be flexible

68
Q

does the size of an insurance company matter?

A

no, it’s about its rating, ability to pay claims, and experience of the agent themselves

69
Q

losses from non publicly traded partnrships

A

passive loss
loss is not deductible until the limited partner sells the interest or dies

70
Q

losses if you’re an active participant in an LLC

A

deducible up to basis

71
Q

what kind of plans isn’t subject to FICA and FUTA

A

125 plan
This is a FSA

72
Q

transfer for value rules

A

if an interest in a life insurance policy is transferred for valuable consideration (not a gift)
Excess of the consideration paid for the policy, combined with any premiums paid by the owner, are taxable as OI!

73
Q

exceptions to transfer for value rules

A

sale or transfer to:
the insured
partner or a partnership in which the insured is a partner
corporation in which the insured is a shareholder or officer
transfer of property incident to a divorce

74
Q

K1s type of income

A

a K1 from an S corporation represents a distribution of profits and is treated as INVESTMENT income, not earned income

75
Q

recapture tax if you stop 72t early

A

10% of the total annual payments received before age 59 1/2, plus interest

76
Q

if someone has a family, what things should we address first?

A

insurance, specifically life and disability

77
Q

social security reduction in benefits

A

During FRA year ONLY, you lose $1 in benefits for every $3 above the threshold
Before that it’s $1 for every $2 earned

78
Q

gifts of appreciated property

A

carryover basis
annual gift exclusion doesn’t effect basis
gift taxes only adjust basis if the property appreciated

79
Q

What is generally included in a corporate annual report?

A

depreciation methods
stock otions
inventory methods
outlook for the firms products in various industires

NOT profit projects as these could be misleading

80
Q

prepaid tuition plans

A

only cover tuition and fees NOT room and board
affect the EFC

81
Q

HO 15 basics

A

increased limits on property and higher sublimits on jewelry and furs

82
Q

gift of stock if it hasn’t appreciated

A

at the time the stock is gifted, if it hasn’t appreciated, the gift tax paid cannot be added to the basis

83
Q

are coverdell contribtuions deductible?

A

no

84
Q

is a coverdell contribution a gift of present or future interest?

A

it’s a gift of present interest

85
Q

uni (solo) 401k

A

allows up to $76,500 in contributions, making it superior to SEP and target benefits
This requires eligibility of course

86
Q

when should you apply for medicare?

A

3 months before your 65th birthday

87
Q

how is the medicare part b premium calculated

A

Enrollee’s AGI two years prior

88
Q

deductibility of medicare premiums

A

above the line deduciton if you’re self employed

otherwise it would have to be itemized on your schedule a and be >7.5% of agi

89
Q

medicare part a inpatient care

A

days 1-60 medicare pays all but a flat deductible amount
beginning day 61, the parient is responsible for a daily copay

90
Q

stock redemption (entity purchase) vs Cross purchase (stockholder purchase)

Who owns the policy?

A

EP - Corporation is the owner and beneficiary

SP - life insurance is required by each shareholder on the lives of each other

91
Q

what does the CML tell us

A

the expected return on a full diversified portfolio

It should fall somewhere along the CML

92
Q

HSA and LTC

A

HSAs can pay for qualified LTC premiums (age based)

Remember, not allowed in FSAs

93
Q

in regard to the SML, beta is what?

A

a variable on the horizontal axis

94
Q

taxation of life insurance surrender gain above baiss

A

always taxed as ordinary income

95
Q

1244 - limits

A

$100k MFJ
$50k single

96
Q

life settlements and taxes

A

look for the LTCG answer
premium paid - cost of insurance = basis

cash received - basis = rec. income

97
Q

purpose/goals of immunizing a bond portfolio

A

to reduce the bond portfolios market losses
to earn a specific rate or return over time
to offset interest rate risk with reinvesemtn rate risk

98
Q

taxation of section 162 insurance premiums

A

section 162 disability insurance
ER deducts the premiums
ee recognizes premiums in income
benefits are tax free to the employee

99
Q

50% organizations

A

public charities
churches
schools
hospitals
charitable, religious, educations, or literary purposes or for the prevention of cruelty to children and animals

100
Q

30% organizations

A

private charities
private nonoperating foundations
fraternal orders
war veterans orgs

101
Q

spousal death benefits for social security

A

if your spouse dies and you qualify you get the greater of your benefit or their benefit

102
Q

what is conduit income?

A

sole props
general partnerships
subchapter s corps

103
Q

S corp FICA and FUTA

A

cash distributed by an S corporation is nontaxable return of invest that reduces basis

not subject to FICA or self employment taxes

SALARY of an S corp owner is subject to FICA and FUTA

104
Q

HO6 and coverage A

A

technically $5k of loss assessment coverage

105
Q

A section 179 election is best described as

A

an election to expense the cost of certain assets and it’s available for tangible personal property (1245)

106
Q

vaccines covered under medicare part b

A

annual flu shot and pneumonia shot

107
Q

SCIN basics

A

Self-canceling installment note
PV of remaining payments are included in owner’s estate
gain is capital gain

108
Q

tax free scholarhip for what expenses

A

books
tuition
course related fees
equiment
supplies
REQUIRED FOR A COURSE

109
Q

QDRO

A

qualified plans NOT IRAs

110
Q

TIPS

A

principal of TIPS can go up or down
pays a fixed rate of interest every six months until they mature
interest amount also varies

CFP - Review Cards (17 decks)

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