Question Bank Misses Flashcards
From the final 6 quiz blocks
How do you determine excess alimony
it’s the amount that exceeds the payment in the following year by $15k (or something like that)
split gift things to remember
Form 709
both spouses must file
Joint Life Distributions
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)
Name the qualified plan types
Money Purchase pension plan
target benefit
profit sharing
profit sharing 401k
stock bonus/esop
Non qualified plans (hint: theres 5)
SEP
SIMPLE
SARSEP
Thrift or savings plans
403b
What is Net Present Value
it’s a calculation that discounts unequal cash flows at a required rate of return less the initial cost of the investment
add back items for AMT
property, state, city/income, and sales taxes
incentive stock option (bargain element)
preference items for AMT
IPOD
Excess INTANGIBLE drilling costs
Private activity muni bond
Oil and gas percentage depletion
Depreciation
Strategic vs Tactical asset allocation
think short term for tactical asset allocation
General Roth IRA withdrawal rules
Retirement 6-8
If interest rates are expected to decline what bond feature should you look out for?
call protection (generally 10 years)
If interest rates are expected to rise, what bond feature should you be on the lookout for?
a put feature
Basis of charitable income tax on stock
the charitable income tax deduction is generally based on the FMV of the stock as of the date when its transferred to charity
What are the four categories of college funding/savings vehicles that can only be used individually
AOC
LLC
Coverdell
529
collision vs comprehensive on PAP
Collision - “covered auto or its impact with another vehicle or object”
Other than collision -
flood, earthquake, vandalism, explosion, etc
if a disgruntled client worked with a b/d where should they complain?
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
License for ETFs
ETFs are traded without prospectus, therefore you must have a 7
basis, gifts, and gift tax paid
basis to a donee is increased by the gift tax paid by the donor that is attributable to the appreciation of the gift
how much of the child tax credit is refundable?
$1,600 per child
QBI below or above the line
QBI is below the line
QBI phase out for personal service business
phased out at $483,900
financial planning vs financial advice
Planning is comprehensive
advice is generally stand alone
ARM base rate
SOFR (Secured Overnight Financing Rate)
this is the base rate used for many loans and financial derivaties
501c9 - VEBA
What benefits can an employer fund?
death benefits
medical expense beenfit
disability benefits
legal expense benefits
unemployment benefits
child care benefits
severance benefits
education benefits
NOT Deffered compensation
Not retirement
Coverdell ESA qualified expenses
MOST things are covered, to include:
tuition
fees
tutoring
special needs services
books
supplies
room and board
uniforms
extended day programs
computers/technology
what is provisional income
income (MAGI) plus half of their social security benefits
is deferred comp considered compensation for DB calculations?
Deferred compensation is not treated as compensation until it is constructively received
what type of trust is required to distribute its income annually?
simple trust
when in doubt you should _____ your client
EDUCATE
What happens if a grantor of a QPRT dies during the retained interest term? (question 16)
the grantor’s estate is left with no greater tax liability than had the QPRT not been established
MEC requirement
entered after June 21, 1988
Fails to meet the 7 pay test
Taxation of distributions under a MEC
“interest-first” rule
before 59 1/2 = 10% federal penalty tax
DB is excludable from income
what is the 7 pay test?
excess premium paid in the first seven years
Elaborate on Section 415
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).
ISO taxation
Appeals of DEC rulings
ANY ruling can be appealed within 30 days of notice of the adverse ruling by mail
Must submit a petition for appeal
Summary of liability for payments of the GSTT
direct skip = transferor pays
taxable termination = trustee pays
taxable distribution = transferee pays
integration with Social security
Target benefit
money purcahse
profit sharing
stock bonus
SEP
NOT ESOP or SIMPLE
ER contributions for group disability (taxation)
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.
risk of zero coupon bonds
NO reinvestment rate risk
Can standard deviation be negative
No
how many years can be used for the calculation of standard deviation on a stock?
there is no limit
1031 vs 1035 exchange
1031 is property
1035 is insurance
carryforward of charitable income tax deductions
the NEXT 5 years or until death
treynor vs sharpe (when to use each)
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
charitable bargain sales
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
what type of Employer group coverage is not tax deductible by the employer
Code section 125
Flex spending accounts -these are EE funded
company borrowing against cash value on key employees
a business may deduct a limited amoutn of interest
each loan can’t exceed $50k
uninsured motorist is WHAT
liability protection
IRA RBD
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
dollar limit that can be converted from a traditional to a roth IRA
TRICK. there isn’t one
what types of gifts do you not need to disclose to clients?
minimal gifts like fruit and candy
Taxation of dividends in a MEC
become taxable when BORROWED or withdrawn
AOC vs LLC
AOC is per eligible student per year
AOC can’t be used if you have a felony drug conviction
What does NPV ultimately tell you?
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
basis for an equity owner in an S corporation
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
where do you add taxable gifts?
to the TAXABLE ESTATE, not the gross estate
general powers of appointment if you die with them
property subject to general powers of appointment are included in the gross estate of the holder of that power
monetary policy refers to activities in which the federal reserve engages to influence what?
money and credit
hardship loans
are NOT for IRAS
there is no such thing as a hardship withdrawal on an IRA
SEC registered advisors with at least $100M have to file ADV updates within ___ days of the end of their fiscal year
90
*remember, if they are registered with the state (smaller firms) this is regulated at the state level
gross estate
Gross estate= total FMV of all property and interests “owned” or controlled by the decedent at the time of death
taxable estate
adjusted gross estate, less the maritial and charitable deductions
tax base
the taxable estate plus adjusted taxable gifts (the amounts exceeding annual gift tax exclusion)
what is time weighted return
geometric mean
why would you pick time weighted return over dollar weighted return?
to evaluate the performance of the portoflio manager
Key characteristics of profit sharing plans
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
does the size of an insurance company matter?
no, it’s about its rating, ability to pay claims, and experience of the agent themselves
losses from non publicly traded partnrships
passive loss
loss is not deductible until the limited partner sells the interest or dies
losses if you’re an active participant in an LLC
deducible up to basis
what kind of plans isn’t subject to FICA and FUTA
125 plan
This is a FSA
transfer for value rules
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!
exceptions to transfer for value rules
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
K1s type of income
a K1 from an S corporation represents a distribution of profits and is treated as INVESTMENT income, not earned income
recapture tax if you stop 72t early
10% of the total annual payments received before age 59 1/2, plus interest
if someone has a family, what things should we address first?
insurance, specifically life and disability
social security reduction in benefits
During FRA year ONLY, you lose $1 in benefits for every $3 above the threshold
Before that it’s $1 for every $2 earned
gifts of appreciated property
carryover basis
annual gift exclusion doesn’t effect basis
gift taxes only adjust basis if the property appreciated
What is generally included in a corporate annual report?
depreciation methods
stock otions
inventory methods
outlook for the firms products in various industires
NOT profit projects as these could be misleading
prepaid tuition plans
only cover tuition and fees NOT room and board
affect the EFC
HO 15 basics
increased limits on property and higher sublimits on jewelry and furs
gift of stock if it hasn’t appreciated
at the time the stock is gifted, if it hasn’t appreciated, the gift tax paid cannot be added to the basis
are coverdell contribtuions deductible?
no
is a coverdell contribution a gift of present or future interest?
it’s a gift of present interest
uni (solo) 401k
allows up to $76,500 in contributions, making it superior to SEP and target benefits
This requires eligibility of course
when should you apply for medicare?
3 months before your 65th birthday
how is the medicare part b premium calculated
Enrollee’s AGI two years prior
deductibility of medicare premiums
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
medicare part a inpatient care
days 1-60 medicare pays all but a flat deductible amount
beginning day 61, the parient is responsible for a daily copay
stock redemption (entity purchase) vs Cross purchase (stockholder purchase)
Who owns the policy?
EP - Corporation is the owner and beneficiary
SP - life insurance is required by each shareholder on the lives of each other
what does the CML tell us
the expected return on a full diversified portfolio
It should fall somewhere along the CML
HSA and LTC
HSAs can pay for qualified LTC premiums (age based)
Remember, not allowed in FSAs
in regard to the SML, beta is what?
a variable on the horizontal axis
taxation of life insurance surrender gain above baiss
always taxed as ordinary income
1244 - limits
$100k MFJ
$50k single
life settlements and taxes
look for the LTCG answer
premium paid - cost of insurance = basis
cash received - basis = rec. income
purpose/goals of immunizing a bond portfolio
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
taxation of section 162 insurance premiums
section 162 disability insurance
ER deducts the premiums
ee recognizes premiums in income
benefits are tax free to the employee
50% organizations
public charities
churches
schools
hospitals
charitable, religious, educations, or literary purposes or for the prevention of cruelty to children and animals
30% organizations
private charities
private nonoperating foundations
fraternal orders
war veterans orgs
spousal death benefits for social security
if your spouse dies and you qualify you get the greater of your benefit or their benefit
what is conduit income?
sole props
general partnerships
subchapter s corps
S corp FICA and FUTA
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
HO6 and coverage A
technically $5k of loss assessment coverage
A section 179 election is best described as
an election to expense the cost of certain assets and it’s available for tangible personal property (1245)
vaccines covered under medicare part b
annual flu shot and pneumonia shot
SCIN basics
Self-canceling installment note
PV of remaining payments are included in owner’s estate
gain is capital gain
tax free scholarhip for what expenses
books
tuition
course related fees
equiment
supplies
REQUIRED FOR A COURSE
QDRO
qualified plans NOT IRAs
TIPS
principal of TIPS can go up or down
pays a fixed rate of interest every six months until they mature
interest amount also varies
