Quiz 1

Question 1

Calculate Net Worth
Salary $50k
Personal Property $10k
Car Payment 600
CC debt 3000
Savings Acct 20k
Rent/Mortgage 400
Car Loan 20k
Value of Real Estate 10k
Automobile 25k

Answer 1

$42,000
Assets: personal Property, Savings, Real Estate, Auto = 65k
Liabilities - Credit Card Debt and Car Loan

Question 2

Your client Alice owns the following 4 different diversified mutual funds:
Growth Fund: 45k
Emerging Market Fund: 14k
Govt bond fund: 50k
Corporate bond fund: 35k
Concerned about portfolio risk, she wants to invest more from a recent inheritance, which mf would you add money to?

Answer 2

the emerging market fund because of wanting to lower correlation coefficient to make the portfolio less risky.

Question 3

When, if ever, can a corporation that issues ISOs receive a tax deduction for ISOs?

Answer 3

When it is disqualified.

Question 4

2 ways to deduct his IRA contribution

Answer 4

No annual additions to his account for the tax year and also if modified AGI less than 65k he can deduct

Question 5

Following the death of the grantor or trustmaker which of the following strategies should be the most effective to reduce GSTT?

Answer 5

reverse QTIP

Question 6

The CFP Board urges certificants to avoid the practice of borrowing from or lending to clients. Which of the following factors would generally be considered by the Board of Professional Review?

Answer 6

Borrowing and lending between the planner and clients who are not family members can compromise the financial planning relationship.

Question 7

Are loans permitted from TSAs?

Answer 7

Yes, (called 403(b))

Question 8

Reasonable level of income but also long term growth. Which provide both? Convertible bonds, Preferred stocks, blue chip stocks or corporate commercial paper?

Answer 8

Convertible bonds - can accept lower income potential due to the chance on the upside of growth with the converting to stock feature.

Question 9

Duty of Professionalism

Answer 9

oversee the paraplanner

Question 10

Which of the following is considered self-employment income for purposes of determining self-employment tax?

Answer 10

Board of director fees

Question 11

Top marginal federal income tax rate is expected to increase to 50%. What is the likely effect on the price of muni bonds?

Answer 11

Prior issued bonds would sell for more.

Question 12

If a taxpayer is subject to AMT, which of the following could reduce the AMT payable?

Answer 12

Exercise nonqualified stock options
Take short-term capital gains
Delay until next year the payment of a property tax bill
Exercise and sell an ISO in the year of exercise

Question 13

DB Plan

Answer 13

Don’t forget about the word “benefit” and not deposit.