Sec. 1 - Ch.7: Special Circumstances/Economic Growth Flashcards
How are property settlements taxed?
They are tax-free exchanges
What are the requirements for alimony pre 12/31/2018 to be deductible by the payor and taxable to the payee?
- The tax payers cannot file a joint tax return or live together at the time of the payment
- Payments must be made in cash
- Payments must be received by or for the benefit of the payee spouse (i.e. not treated as child support)
- The payments cannot extend beyond the death of the recipient spouse by decree or by state law
How is child support payments taxed?
Child support payments are on-taxable to the payee and nondeductible by the payor
**Any amount tied to a contingency or occurrence of an event relating to a child is considered to be child support and not alimony
How are property settlements taxed in a divorce? How is basis handled?
Any transfer of property between spouse’s incident to a divorce is gift tax free
- The basis in the property is “carried over” to the transferee
Who is favored in intestacy cases?
Blood relatives over domestic partners
What are the best transfer agreements for unmarried domestic partners?
Revocable trusts and tenancy-in-common
- A will can be contested and a JTWROS can be siphoned by a disgruntled partner
What is COBRA and who offers it?
- Employers providing group or self-funded health coverage that are required to offer terminated employees the right to buy continued health coverage
- Small companies are exempt from this: fewer than 20 employees for at least half the year
What are structured settlements? How are they taxed?
Voluntary agreement between the personal injury victim and the defendant who was deemed to be negligent
- Injury victims receive a stream of tax-free payments tailored to meet future medical expenses and living needs, as opposed to one lump-sum
What are compensatory damages? How are they taxed? How does it change if the damages are due to discrimination or other non-physical injuries?
Damages received due to physical injuries or physical illness
- They are generally tax-free, but interest paid on a tax free damage award is taxable.
- Damages received in discrimination or other non-physical injury cases are taxable
**Exception: damages up to the amount of actual medical care expenses due to emotional distress are tax-free
How are punitive damages taxed? What is the exception?
Punitive damages are taxable
**Exception: Damages paid to a beneficiary in conjunction with wrongful death are received tax-free
What is Supply? What factors determine Supply?
The amount of a good or service that producers are willing to sell
Determined by:
- Price
- Costs of production (i.e. labor costs)
- The level of tech
What is Demand? What factors determine Demand?
The amount of a good or service that buyers are willing to purchase
Determined by:
- Price
- Price of other goods, especially substitute goods
- Consumers’ income and tastes
What is the reserve requirement?
Is the level of reserve the Fed sets for its member banks that they must maintain.
- If it is reduced than this is expansionary policy
- If it is increased than this is contractionary policy
What is the Discount Rate?
It’s the rate the Fed charges its member banks to borrow to med reserve requirements (this is the rate between the Fed and the banks not the banks and the publics)
– If they reduced the rate than this is expansionary policy
- If they increased the rate than this is contractionary policy
What is Open Market Operations?
The fed’s trading desk adjusts credit availability daily through repurchase and reverse-repurchase agreements with government securities dealers
- Repo/buying bonds is expansionary policy. They are putting money into the economy
- Reverse Repo/Sell bonds is contractionary policy. They are taking money from economy
What is the Federal Funds Rate? Is it controlled by the Fed?
Fed Funds are excess reserves maintained at the Fed by the member banks. The Federal Funds rate is the charge for overnight loans from one bank to another banks. This is not controlled by the Fed, so it is not a form of monetary policy
What are some leading economic indicators?
- Initial claims for underemployment insurance
- New manufacturing orders
- New private housing units
- Stock prices, 500 common stocks
- Index of consumer expectations
What are some coincident indicators?
- Number of employees on non-ag payrolls
- Personal income less transfer payments (e.g. Social Security, welfare)
- Industrial production
What are some lagging indicators/confirming indicators?
- Average duration of underemployment
- Average prime rate charged by banks
- Commercial and industrial loans outstanding
What is the Prime Rate? Is it used for monetary policy?
The interest rate that commercial banks charge their most creditworthy corporate customers (the bank and public relationship)
- IT IS NOT a monetary policy tool
- It is the wrong answer on the test if asked in accordance with monetary policy
What is GDP?
Gross Domestic Product
The US economy’s total production of goods and services. It measures the dollar value of all final goods and services newly produced within the country’s boarders
Consumption + Investment + Government Spending + Net Exports
**GDP counts economic activity without regard to yearly price fluctuations (like inflation)
What is CPI? What are the 8 major categories?
Consumer Price Index
A market basket of selected goods and services in various cities across the country
The 8 Major Categories:
- Food & Beverage
- Apperel
- Education & Communication
- Housing
- Transportation
- Other goods and services
- Recreation
- Medical care
What is PPI? It is the leading indicator of what?
Producer Price Index
The index of the price of various items such as farm products and industrial commodities
**It is the leading indicator of inflation trends
What is inflation?
The rise in prices of goods and services, as it is likely when spending increases relative to the supply of goods on the market - too much money chases too few goods
