Questions

Question 1

Know parts of personal auto policy (PAP).. ABCD

Answer 1

A. Liability (THEIR AUTO)
B. Medical
C. Uninsured motorist
D. Damage to YOUR auto

Question 2

Money purchase plan

Answer 2

Standard Pension with fixed amount (2% salary)

Question 3

Target benefit pension

Answer 3

Standard pension that favors older people with target retirement amount per year

Question 4

Adjustments (above the line)

Answer 4

IRA, student loan interest, alimony (pre 2019), self employment tax (.07065), self employment health insurance, sep, HSA

Question 5

1040 (A,B,C,D,E)

Answer 5

A:itemized deduction
B: taxable interest (bank)
C: self employment (Carter)
D: capital gains and losses
E: real estate

Question 6

Client has 4 partnerships:
Public: -$12,000
Non public: -$13,000
Public: $19,000
Non public: $15,000

Answer 6

The non public nets to $2,000 income and public ones have $12,000 in losses (stays in partnership) and $19,000 in portfolio income

Question 7

How much max income is “poorish” for education grants?

Answer 7

$60,000

Question 8

What can the American Opportunity Credit be used for?

Answer 8

$2,500 of expenses for undergrad ONLY. Subject to phase outs

Question 9

Lifetime Learning Credit

Answer 9

$2,000 max, any higher learning (including CE), phase outs

Question 10

Coverdell

Answer 10

Used before 30yrs old, phase outs, creditor protected, $2,000/yr contribution

Question 11

529 Plan

Answer 11

No phase out, used for anything, $16,000/yr x 5 years front load

Question 12

What assets are subject to probate?

Answer 12

Community Property
Estate beneficiary
Singly owned assets
Tenants in common

Question 13

Where in estate planning do you get to take charitable deduction?

Answer 13

From adjusted gross estate to taxable estate

Question 14

Explain A, B, C trusts

Answer 14

A: marital, spouse controls assets, marital deduction, everything transfers to spouse
B: bypass, deceased controls, income for spouse
C: QTIP, deceased controls, income for spouse, marital deduction

Question 15

How does a GRAT/GRUT work? What happens when grantor of a GRAT dies within term?

Answer 15

Grantor gifts property and gets income stream for term. Once term is over it goes to beneficiary. If grantor dies within term it’s brought back into owners estate (gift appreciating assets)

Question 16

Installment sale: what happens if grantor dies with payments remaining?

Answer 16

PV of remaining payments are brought back into estate. Gain is capital gain.

Question 17

Self-canceling installment note (SCIN)

Answer 17

No value in owners estate if dead, assets can be depreciated, interest can be deducted, HIGHER PAYOUT than installment sale, gain is capital gain,

Question 18

UGMA/UTMA difference?

Answer 18

UTMA can have real estate (trump)

Question 19

Section 303 stock redemption

Answer 19

Must be incorporated with closely held stock, must exceed 35% of adj gross estate, amount redeemed cannot exceed estate tax

Question 20

Special use valuation (2032A)

Answer 20

Farming! 50% of gross estate must be real or personal property, 25% must be real property, must be used 5 out of 8 years before death and used for 10 years after

Question 21

Installment payment of estate taxes (6166)

Answer 21

Businesses must exceed 35% of adj gross estate, ONLY interest (2%) for the first 4 years then 10 years payback,

Question 22

Property Classes:
5-year 1245
7-year 1245

Answer 22

5 year: computers, autos, and light duty trucks
7 year: office furniture and fixtures

Question 23

How much can you deduct from political gifts?

Answer 23

Nothing, but you don’t have to worry about gift tax.

Question 24

Who can contribute to an HSA?

Answer 24

Person, employer, family member, etc. on behalf of person.

Question 25

CML vs SML

Answer 25

Capital market line is the ENTIRE portfolio
Security market line is JUST the security

Question 26

Can an HSA pay for LTC premiums? How about an FSA?

Answer 26

Yes, no

Question 27

How is life insurance taxed above cost basis if surrendered?

Answer 27

Ordinary income

Question 28

How long do you have if you believe you deserved a refund for previous years taxes?

Answer 28

3 years from original filing or within 2 years of paying taxes for that return. On 1040X

Question 29

How much can you deduct for gifts to charity when you’re donating business services, inventory, or a creative work of art?

Answer 29

Basis

Question 30

How much of a life insurance benefit paid by the company under a group plan is tax free?

Answer 30

$50k

Question 31

What is the penalty for redeeming an annuity before 59? What are annuities taxed at?

Answer 31

Ordinary income + 10% penalty

Question 32

How much of a loss can you take as a 1244 ordinary loss?

Answer 32

$100k married, $50k single, $3,000 capital, $remainder carry forward. This is for closely held business that’s losing value rapidly and owner can take loss as ordinary instead of capital.

Question 33

Permitted disparity of base? Excess?
How do you calculate excess percentage?

Answer 33

Base disparity: 5.7%
Excess disparity: 26.25% or base (lesser)

To calculate excess percentage: add the permitted disparity to base!

Question 34

SEP IRA deferral amounts: self employed and w2

Answer 34

Self: 18.58%
W2: 25%

Question 35

GSTT Calc: $17,060,000 gift to trust for daughter, remainder to grandkids on her death. What’s gift tax and GSTT tax?

Answer 35

Gift=2,000,000
GSTT=$1,200,000
Calculate gift taxes on excess of 12,060M @40%, take entire gift amount and subtract GSTT exclusion of 12,060, then subtract the gift taxes taxes PAID from GSTT amount and pay 40% GSTT ON THAT

Question 36

Skip person difference?

Answer 36

One generation removed or 37.5 years different if unrelated

Question 37

Kiddie tax

Answer 37

$1,150 exclusion, 10% next $1,150, parents marginal rate after

Question 38

Monetary vs fiscal policy

Answer 38

Fiscal: tax and gov spending
Monetary: gov central bank (money supply, rates, reserve requirements)

Question 39

What is standard deviation % for 1 SD? 2 SD?

Answer 39

1: 68% (subtract SD from mean)
2: 95%
3: 99%

Question 40

MACRS deductions for 5 & 7 year

Answer 40

5: yr1 = 20% yr2 = 32%
7: yr1=14.29% yr2=24.49%

Question 41

CRUMMEY TRUST

Answer 41

A gift of future interest that can qualify for annual exclusion because the crummey provision allows the beneficiary to withdraw the LESSER of the amount of money put in each year or annual exclusion. Example: Granddaughter is bene and grandma puts in $20,000 this year, granddaughter can withdraw $16,000 this year and because she has that right, the gift is of present interest when it goes into the trust. Granddaughter probably wouldn’t do it though. Good for ILIT

Question 42

DDM

Answer 42

Last dividend/(r-g)