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CFP > Stray Stuff > Flashcards

Stray Stuff Flashcards

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CFP® flashcards
1
Q

Does NII Tax include tax-exempt income?

A

No!

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2
Q

If you buy options out of the money and you own the stock, what’s that called?

A

Naked call writing. Because you’re out of the money. It’s covered call writing if the option is in the money.

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3
Q

Family Limited Partnership - if you distribute to a kid, is it taxable?

A

It is to the kid. The gift tax exemption does not apply.

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4
Q

Are forgiven student loans taxable?

A

Yes (unless it’s a public service loan)

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5
Q

If you create a partnership and you donate property to it, is your basis the FMV or the property or the basis of the property?

A

The basis.

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6
Q

When you die, what % of your retirement assets go into your estate?

A

50%. EVERYTHING is 50%, no matter what. The retirement thing is true because joint assets were used to fund retirement accounts.

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7
Q

EE Deferrals: Max? catchup?

A

$23k and $7.5k (it’s on the sheet, but still…)

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8
Q

Fair Credit Act?

A

Right to know what’s in your credit report

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9
Q

Consumer Credit Protection?

A

Right to know the costs and terms of credit (aka “truth in lending”)

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10
Q

what is the Equal Credit Opportunity Act?

A

Right to fair opportunity to get credit

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11
Q

Intrinsic value of an option is what?

A

MP-EP for a call. The rest is time premium.

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12
Q

Annuitization - which form gives the highest income? Life - 20 year certain or Life Only?

A

Life only will give the highest income but you might die before you collect!

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13
Q

Under SEC Rule 415, how long do companies have to issue shares from their IPO filing?

A

2 years

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14
Q

If you own life insurance on somebody else, but you die, does that life insurance go into probate?

A

Yes.

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15
Q

If you filed MFS and your spouse died, can you file MFJ in that year?

A

Yes.

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16
Q

With a 1031 exchange, how many days to you have from the date of transfer of your original property to identify your next property?

A

45

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17
Q

With a 1031 exchange, and you’ve transferred your property, how long do you have to complete the transfer of the new property?

A

180 days.

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18
Q

SS discount if taken 5 years early? 3 years early?

A

30%; 20%

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19
Q

Social security is taxed on Provisional Income. What’s the formula for provisional income?

A

AGI + tax-exempt interest + 1/2 SS benefits

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20
Q

What’s the tax bracket for taxes on Social Security benefits?

A

MFJ: 50% $32-44k, 85% $44k+
Single: 50% $25-34k, 85% $34k+

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21
Q

Wash sale rule?

A

You can’t buy the same security 30 days before or 30 days after the day of the sale. That’s a 61 day window (-30, 0, +30).

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22
Q

Which is the measure of total risk: std dev or beta?

A

SD

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23
Q

Is a QDRO distribution to someone under 59.5 subject to taxes and 10% penalty if not rolled over?

A

No penalty. Just ordinary income.

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24
Q

Special Needs Trust basic needs?

A

Food, shelter, clothing

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25
Q

Special Needs Trust supplemental needs?

A

Phone, entertainment, education, special equipment, medical needs

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26
Q

What’s an option collar?

A

It’s to hedge the stock without the cost of premiums. Own stock, sell call, buy put. No cost hedging.

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27
Q

What’s Straddle and Spread used for?

A

Straddle is for high volatility, Spread is low volatility.

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28
Q

Section 1031 Gain Exclusions - what’s the rule?

A

1 must own, 2 must live. If they have to move for a good reason before the 2 years, calculate the exclusion per person based on how long they’ve EACH lived there ($250k each max). One might get $250k, the other a partial.

29
Q

If your spouse dies leaving you with little kids how do you file this year and beyond?

A

Year of death MFJ. The next 2 years you do QW then HOH if you have minor kids.

30
Q

Expected Family Contribution amounts: Assets and Income, Parent and Kid

A

Assets: 5.64 and 20
Income: 22-47 and 50 (over $9,410)

31
Q

On the Statement of Financial Position (aka Balance Sheet), are Annuities and CV Life Insurance considered Invested Assets?

A

Yes.

32
Q

If you or your firm needs to report any changes to your clients (like bad boy stuff), how many days do you have?

A

90 days.

33
Q

What’s the latest you can start a SEP for 2024?

A

When you file your taxes, even if that’s 9/15/25 with extentions.

34
Q

What’s Section 1231 property?

A

Property that’s used in a trade or business
for production of income

35
Q

In a GRUT, who pays the taxes and at what tax rate?

A

Grantor pays at ordinary income tax rates.

36
Q

SEP IRA Eligibility?

A

21, employed last 3 of 5, make over $750

37
Q

Simple IRA Eligibility

A

$5k pay in any of prior 2 years and will make that this year.

38
Q

Under the provisions of the Equal Credit Opportunity Act, a potential borrower must receive a response from a creditor within _________ after an application indicating whether the request has been approved or denied.

A

30 days

39
Q

For 529 puposes is a step sibling considered part of the family if the parents want to change the beneficiary to them?

A

YES.

40
Q

What’s the Gift Tax Adustment Formula?

A

gift tax paid TIMES
appreciation / (MV - 18k)

41
Q

When a kid gets an inherited IRA, what is the RMD for him?

A

Over lifetime until age 21 and then 10 years.

42
Q

Net Unrealized Appreciation - when do you get hit with LT capital gains tax? When you move the shares out of the plan or when you sell?

A

When you sell.
You do owe ordinary income tax on the cost basis in the tax year of the distribution.

43
Q

In a DDM where there is a 2 year growth rate and then it changes in year 3, how do you set up the CFs?

A

Year 2 includes two components: Year 1 X stage 1 growth rate PLUS terminal value based on stage 2 growth rate. So…
Year 1 is CF1
Year 2: CF2 = CF1*new growth. So it’s
CF2 + CF3/(r-g)

44
Q

In an ILIT, when do beneficiaries get Crummey Powers?

A

When it’s NOT funded.

45
Q

In a funded ILIT, does the trust pay the tax or does the grantor pay the tax?

A

Grantor.

46
Q

If the CFP Board issues you an administrative order of suspension, what’s the minimum time you’re suspended?

A

1 year.

47
Q

Property transferred to a spouse by QTIP - do you get the marital deduction? Do you get it out of your estate?

A

Yes and Yes.

48
Q

If you gift TIP, do you remove it from your estate?

A

Yes

49
Q

If you gift TIP, is it includable in the spouse’s estate?

A

No.

50
Q

If your spouse isn’t a US citizen and you don’t have a QDOT trust, is there a marital deduction?

A

No. You’re completely fooooked. Your estate will be your $20MM or whatever and no marital deduction, so fork over 40% on your $20MM! Your spouse will get the rest.

51
Q

Capital preservation / Purchasing Power Preservation steps

A

Step 1: Do you need to inflate today’s retirement needs by inflation? If so, do that to get retirement year 1’s expenses.
Step 2: What do you need on day 1 of retirement to fund your expenses? Calc the PV (use inf adjusted return if the annual expenses need to grow with inflation). BEG.
Step 3: What’s the PV of that FV from step 1? Use the same # of years in retirement, use nominal return for i (use inf adj return for PPP). BEG.
Step 4: Add Step 2 and step 3

52
Q

529 disability qualifications : how many months do you have to be expected to be disabled?

A

12+ months

53
Q

What’s the max you can contribute to a PS plan for a 50+ person?

A

$69,000 + 7,500.

54
Q

For FDIC insurance, is a joint account for $100k between 2 people $100k for each or $50k for each?

A

$50k each. You split the deposit amount.

55
Q

What is the definition of being “active” in a real estate property?

A

You own 10%+ and you have “substantial involvement” in the management of the property. THERE ARE NO HOURS THE DEFINITION.

56
Q

Full Property ownership, active. You lose money. What’s the limit and the MAGI phaseout?

A

$25k max. MAGI phaseout is $100-150k

57
Q

Does a QDRO apply to just qualified plans or all plans?

A

All plans.

58
Q

Taxes - negligence penalty? Fraud?

A

20% / 75% of tax deficiency

59
Q

Calculate the Medicare tax on $300k pay MFJ

A

$250k * 0.9235 * 2.9%
PLUS
$300k * 0.9235 - $250k limit * 0.9%

60
Q

what’s more liquid: marketable securities or accounts receivable?

A

Marketable securities

61
Q

Who’s subject to SS reductions: current spouse, kid, former spouse?

A

Current spouse and kid can be reduced but not the crazy ex-spouse. Really. WTF.

62
Q

Rule on Roth IRA distribution?
Tax and penalty on early Roth IRA distribution?

A

If you meet no exceptions and it’s been open <5 years:
Earnings: ord inc tax and 10% penalty
Contributions: come out tax-free

63
Q

Rule on Regular IRA distribution?
Tax and penalty on this?

A

If it’s allowed, all distribution is ord inc
Otherwise it’s:
Earnings: ord inc tax and 10% penalty
Contributions: ord inc tax

64
Q

Rule on ER plan withdrawal?
Tax and penalty on this?

A

If it’s allowed, it’s ordinary income tax. No penalty.
Otherwise, if you don’t roll it over, it’s 20% withholding and 10% penalty on the whole withdrawal.

65
Q

When are you allowed to take a distribution from an ER plan without penalties?

A

Over 59.5
Medical expenses over 7.5% of AGI
Death/Disability
Equal payments over 5 years
You’re 55+ and you leave your company

66
Q

When are you allowed to take a distribution from an IRA without penalties?

A

Over 59.5
Medical expenses over 7.5% of AGI
Death/Disability
Equal payments over 5 years
College Education
Pay health insurance premiums if unemp
$10k for first time home buyer

67
Q

Rule on annuity/MEC withdrawal?

A

Withdrawals come out earnings first
If annuitizing tax free part is basis/(ann pmt X life expectancy)
If you don’t meet the exceptions, early withdrawals have 10% penalty and ord inc tax on the earnings.

68
Q

When are you allowed to take a distribution from an annuity/MEC?

A

Over 59.5
Death/disability
Equal pmts over 5 years (annuity only)
Immediate non-qual annuity (annuity only)

69
Q

Rule on Simple IRA withdrawal?

A

If under 59.5, 25% if in the first 2 years of the plan.

CFP (7 decks)

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