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Questions Answered Wrong Flashcards

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1
Q

What types of specific information should be gathered in the planning process in regards to the client’s life insurance contracts?
1 retirement account values
2 property insured
3 premium and dividend options
4 policy loans
5 ownership

A

3,4,5

Retirement account values and property insured do not apply to life insurance contracts.

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2
Q

A prospective clients tells CFP professional about a mutual fund that she is considering purchasing. It will distribute a substantial capital gain in a few weeks. What questions should CFP professional ask client at this point?

1 client date of birth
2 her investment objectives
3 other investment she has?
4 will she take the capital gains in cash or reinvest
5 what is the client’s investment experience to date?

A

All

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3
Q

Tom is debt free. He moved 4000 from his money market account yo contribute to a Roth IRA. From his cash flow, he invested 25000 in a new mutual fund during the year. In addition, due to good investment performance, his current investment plus his home grew in value by $100,000. What was his change in net worth for the year?

A

125,000

Pay attention onto the source of the fund. If move within accounts- does not count. If “from cash flow”, “ new add-ins”, then count into the change in net worth.

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4
Q

Which agency regulates brokerage companies

A

FINRA

Sec regulates brokerage firms via FINRA

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5
Q

Insurance calculation

A
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6
Q

Sally, age 8, has an UTMA account funded by her ghrandfather(12% tax bracket). In the current year, her account generated $2600 of interest and dividends. Her father is the custodian. His income tax bracket is 24%. What is the amount tax due on Sally’s account?

A
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7
Q

John and Helen want to fund a college education for her son, William, age 2. William will attend college for 4 years starting 19. They feels that the cost of college will be $12,500/yr in today’s dollar. They feel that they can achieve. An 8% after-tax yield on their investments and that college inflation will be 5% over the next 20 years. What is the lump sum they need to invest?

A
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8
Q

Barry duffers from a world-related injury. He is awarded 1mllion as compensatory damages. The settlement is awarded in the firm of a single premium immediate annuity. How’s the payout being taxed?

A

100% excludable
When a single premium immediate annuity is purchase by the party obligated to make the damage payments, the entire amount of each periodic payment is excludable by the teaxpager receiving the payment.

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9
Q

When does the business cycle peak

A

Business activity ages
(Enough. Does not need to buy more)

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10
Q
A

B
Conflicts of interest should be disclosed in full BEFORE or AT the time T which the financial advise related to the conflict of interest is provided.

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11
Q
A

D. Collectibles and natural resource funds are negatively correlated with the stock market. Trudy may enjoy aesthetics of the fine art. The collectible May suit her lifestyle. Index option is correlated. Put may expire. The global fund include US stocks

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12
Q
A

B, because he is the owner. He has to take RMB

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13
Q

Gary is faced with a tax deficiency of 10,000, along with an interest deficiency if 4,200. The entire deficiency is result of fraud from 2019 tax return. What is the amount of penalty?

A

10K*75%=7,500
75% of the tax deficiency only. Not the interest deficiency

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14
Q

Rose filed an extension on April 15. On June 1x she filed her tax return and owned an additional $400 on a total tax liability of $4100, what is the tax situation ?

A

Rose paid: $3,700
90% of current year tax liability: 90%* 4100=3690

She paid over 90% of her current year tax liability. Rose owns no tax penalty

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15
Q
A

40K+2K-10k=32k

Note that inheritance is not taxable income

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16
Q

Mr. And Mrs. earned active income of 100K. They also have portfolio income of 5k(interest), 7.5k qualified dividends, and 22.5k short-term gains. They have been margining their portfolio and have incurred 40k of current year investment interest expense. What amount of investment interest can they deduct?

A

12，500

The qualified dividend will not be treated as ordinary income. This the 7.5k does not count as investment income. The difference 40k-5k-22.5k=12.5k , is deductible, may be carried forward.

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17
Q

Brooks has 60k earned income. $2k interest from CD, long term capital gains of 3k, and 4K of margin interest. How much of the margin interest is deductible?

A

2k.
This is because he did not opt out of long term capital gains treatment on the 3k. If he did, the answe would be 4K.

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18
Q

Tom, age 61, is self-employed. His business has no employees. He is paying $3,600 for medical insurance,1,209 for dental, and $2,000 for LTC insurance. His current year scheduleC net income is $90,990. Rousing to the nearest whole number, what is his AGI?

A

Net income: 90k
Self-employment tax adjustment: 90*0.7065= 6,358.8
Insurance premiums: 3600+ 1200+2000=6800 (deductible on scheduled 1)

76,841.50

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19
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20
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21
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22
Q

Rose filed an extension on April 15. On June 1, she filed her tax return and owed an additional $400 on a total tax liability of $4100. Which of the following apply?
A failure to file on a timely basis
B failure to pay the total amount due
C no penalty because off prepayment of over 90% of this years’ tax liability
D penalty in $409
E penalty and interest on $400

A

C

90% of 4100=3690
Rose paid 4100-400=3700
So she does not face any penalty , but interest may be due

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23
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24
Q
A

C

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25
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26
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27
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28
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29
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30
Q

Spike earns $200,000 as the young owner of one-employee corporation. What amount is the total that he can defer (2022) to a solo401(k) plan assuming the maximum profit-sharing contribution will be made?

A

Max profit sharing 25% of the comp=50K
61k-50k=11k

31
Q

Jerry owns Nerry’s Jerseys, an S corporation. He takes a salary of $2000 per month. Typically, the corporation has additional earning of 200,000. His basis in the corporation is 0, so Jerry’s K-1 usually reflects additional $200,000 of unearned income. He wants to establish a money purchase plan with maximum contributions. What is the maximum amount Jerry’s Jersey may contribute on his behalf?

A

6000

Compensation means salary. The K-1 is unearned income. Under 415 limit, plan can contribute up to 100% of compensation; however, under section 494 he can only receive a contribution of 25% compensation, or 60000.
Jerry’s Jersey has no employees.
Overall, the deductible plan contribution cannot exceed 25%

32
Q

When using a 3% match formula, the maximum possible contribution (employer and employee combined) that can be made this year to a SIMPLE or a SIMPLE 401k for a 49 year old participant earning $466,667 is ?

A

Simple IRA: 28,000
Simple 401(k): 23,150

Explanation:
Simple Ira: 14k deferral + 3%*$466,667 = 28K

Simple 401k: 14K deferral + 305k*3%=23,150

33
Q
A

A
NUA becomes IRD even when it involves on a beneficiary receiving a distribution from ESOP

34
Q
A
35
Q

Which of the following taxpayers would be eligible for the retirement savings contribution credit?
A married couple AGI 125K, saving in g 6k into Roth IRA
B single person AGI 47K deferring 4K into 401k plan at work
C single person AGI 31K adding 3k to a 529 plan
D married couple AGI 63k deferring 7k into 401k plan to get the employer match

A

D
The retirement savings contributions credit is designed for low to moderate income taxpayers and matches a percentage (based on AGI) of the taxpayer IRA. Retirement plan, or ABLE account contributions but not 529s.

Max is 2000 single and 4000MFJ
No credit is available for taxpayer over 33K single, 66K MFJ AGI

36
Q

You are reviewing a client’s student loans and discussing various income driven repayment option. Which of the following is not an option?
A income based repayment
B income contingent repayment
C pay as you war repayment
D
Pay on your normal schedule over time
E revisited pay as you earn repayment

A

D
The forgiven debt is tax free. The amount of discretionary income utilized is usually 10%-15% depending on when the loan was taken.

37
Q
A

B

38
Q
A
39
Q
A
40
Q
A

D. Because it emphasized the potential conflicts of interests. So disclosure should be necessary

41
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A
42
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A
43
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A
44
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A
45
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A
46
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A
47
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48
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49
Q
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50
Q
A
51
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A
52
Q
A

A.

53
Q

Obligations of an agent to the principle?

A

Loyalty, accuracy, full disclosure, honesty

54
Q
A
55
Q
A

His out-of-pocket investment: 30k
He borrowed 20K + interest for 9 month = 20k10%/43 = 1500
His return: 1.120.951.2=1.2768
50k*1.2768=63,840

His HPR:
Gain= 50k-(20k+1500)-30k
Initial investment =30k

Gain/initial =41%

56
Q
A

Think simply.
Low duration = higher interest.
Recall the yield curve the I and IV

57
Q
A

B

AnswerA: deduct 60K
AnswerB: deduct 39K this year, and 41k next year (total 80k)
Answer C: deduct 65k

58
Q

If corporation has 25K taxable income its 178 deduction is limited to

A

25K.

Up to taxable income.

59
Q
A

B

60
Q
A

C

61
Q
A

C

62
Q
A

D
Fee based: both fee and product commission.

63
Q
A
64
Q
A

Business activity ages means that the public stops buying because they have enough of everting they need

65
Q
A

When single premium immediate annuity is purchased by the party obligated to make damage payments, the entire amount of each periodic payment is excludable by the taxpayer receiving the payments

66
Q
A

D
Heirs are responsible otherwise the bank foreclosure the home

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