Questions Flashcards
Know parts of personal auto policy (PAP).. ABCD
A. Liability (THEIR AUTO)
B. Medical
C. Uninsured motorist
D. Damage to YOUR auto
Money purchase plan
Standard Pension with fixed amount (2% salary)
Target benefit pension
Standard pension that favors older people with target retirement amount per year
Adjustments (above the line)
IRA, student loan interest, alimony (pre 2019), self employment tax (.07065), self employment health insurance, sep, HSA
1040 (A,B,C,D,E)
A:itemized deduction
B: taxable interest (bank)
C: self employment (Carter)
D: capital gains and losses
E: real estate
Client has 4 partnerships:
Public: -$12,000
Non public: -$13,000
Public: $19,000
Non public: $15,000
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
How much max income is “poorish” for education grants?
$60,000
What can the American Opportunity Credit be used for?
$2,500 of expenses for undergrad ONLY. Subject to phase outs
Lifetime Learning Credit
$2,000 max, any higher learning (including CE), phase outs
Coverdell
Used before 30yrs old, phase outs, creditor protected, $2,000/yr contribution
529 Plan
No phase out, used for anything, $16,000/yr x 5 years front load
What assets are subject to probate?
Community Property
Estate beneficiary
Singly owned assets
Tenants in common
Where in estate planning do you get to take charitable deduction?
From adjusted gross estate to taxable estate
Explain A, B, C trusts
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
How does a GRAT/GRUT work? What happens when grantor of a GRAT dies within term?
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)
Installment sale: what happens if grantor dies with payments remaining?
PV of remaining payments are brought back into estate. Gain is capital gain.
Self-canceling installment note (SCIN)
No value in owners estate if dead, assets can be depreciated, interest can be deducted, HIGHER PAYOUT than installment sale, gain is capital gain,
UGMA/UTMA difference?
UTMA can have real estate (trump)
Section 303 stock redemption
Must be incorporated with closely held stock, must exceed 35% of adj gross estate, amount redeemed cannot exceed estate tax
Special use valuation (2032A)
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
Installment payment of estate taxes (6166)
Businesses must exceed 35% of adj gross estate, ONLY interest (2%) for the first 4 years then 10 years payback,
Property Classes:
5-year 1245
7-year 1245
5 year: computers, autos, and light duty trucks
7 year: office furniture and fixtures
How much can you deduct from political gifts?
Nothing, but you don’t have to worry about gift tax.
Who can contribute to an HSA?
Person, employer, family member, etc. on behalf of person.
CML vs SML
Capital market line is the ENTIRE portfolio
Security market line is JUST the security
Can an HSA pay for LTC premiums? How about an FSA?
Yes, no
How is life insurance taxed above cost basis if surrendered?
Ordinary income
How long do you have if you believe you deserved a refund for previous years taxes?
3 years from original filing or within 2 years of paying taxes for that return. On 1040X
How much can you deduct for gifts to charity when you’re donating business services, inventory, or a creative work of art?
Basis
How much of a life insurance benefit paid by the company under a group plan is tax free?
$50k
What is the penalty for redeeming an annuity before 59? What are annuities taxed at?
Ordinary income + 10% penalty
How much of a loss can you take as a 1244 ordinary loss?
$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.
Permitted disparity of base? Excess?
How do you calculate excess percentage?
Base disparity: 5.7%
Excess disparity: 26.25% or base (lesser)
To calculate excess percentage: add the permitted disparity to base!
SEP IRA deferral amounts: self employed and w2
Self: 18.58%
W2: 25%
GSTT Calc: $17,060,000 gift to trust for daughter, remainder to grandkids on her death. What’s gift tax and GSTT tax?
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
Skip person difference?
One generation removed or 37.5 years different if unrelated
Kiddie tax
$1,150 exclusion, 10% next $1,150, parents marginal rate after
Monetary vs fiscal policy
Fiscal: tax and gov spending
Monetary: gov central bank (money supply, rates, reserve requirements)
What is standard deviation % for 1 SD? 2 SD?
1: 68% (subtract SD from mean)
2: 95%
3: 99%
MACRS deductions for 5 & 7 year
5: yr1 = 20% yr2 = 32%
7: yr1=14.29% yr2=24.49%
CRUMMEY TRUST
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
DDM
Last dividend/(r-g)
