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CGT > Teach > Flashcards

Teach Flashcards

1
Q

5 and 5 power

A
  • Right to withdraw min(5%, $5,000)
  • Noncumulative
  • Unwithdrawn amount included in GE at 5% * trust value
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2
Q

Future interest gifts

A

Require filing gift tax returns

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3
Q

Ltd or Special POA

A

Excluded from holder’s GE

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4
Q

Reverse QTIP

A
  • Treats the QTIP property as if the QTIP election was not made for GSTT purposes
  • Assets in a QTIP trust will be included in the surviving spouse’s gross estate at death, regardless of whether a reverse QTIP election was made
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5
Q

Section 303 stock redemption

A

Permits the estate of a decedent shareholder to redeem the decedent’s shares with favorable income tax treatment.

  1. Transaction will be treated as a disposition of an asset (capital gain) rather than receipt of a dividend (ordinary income). This is especially advantageous because the shares received a stepped-up basis at death, and thus, the capital gain or loss is only measured from the DOD instead of the predeath basis.
  2. Conditions
    1. Stock included in GE
    2. Stock value > 35% AGE.
    3. Redemption proceeds eligible for capital gain treatment cannot exceed federal and state death taxes plus deductible funeral and administrative expenses
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6
Q

DNI

A

Excludes capital gains and principal

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7
Q

Retained Life Interest

A

Whether in writing or just an understanding

Included in GE

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8
Q

Government Pension Offset

A

SSWB or Survivor Benefit reduced by 2/3 Govt Pension

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9
Q

Explain how to process SS insurance credits/eligibility

A
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10
Q

What are permitted 401(k) match vesting schedules

A

2 - 6 year, or

3-year cliff

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11
Q

Distributions from a Roth IRA are ordered as:

A
  1. From regular contributions (no tax, no penalty)
  2. From conversions, FIFO (no tax, subject to penalty if attributed to conversion within 5 years)
  3. Earnings (subject to income tax and the 10% early withdrawal penalty)
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12
Q

Determine the taxable portion of an IRA distribution

A

After-tax contributions / Balance *

Distribution

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13
Q

Explain what happens when a plan is top-heavy

A
  1. Must use either 3-year cliff or 2-6 year vesting
  2. Must contribute 3% for all non-key EEs
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14
Q

Max contribution to SEP IRA

A

$19,200

  1. $13,500 EE
  2. $5,700 ER
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15
Q

Limit to convert to a QLAC in a qualified plan

A

min(25%, $135,000)

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16
Q

What is the consequence of not electing NUA?

A

Entire distribution taxed as ordinary income at time of distribution

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17
Q

How much is the max OOP limit for an HDHP?

A

$6,900 single

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18
Q

PAP Part D

A

Damage to your auto

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19
Q

Describe how a cashless NQSO exercise works

A
  1. Calculate cost of exercise
  2. Calculate cost of ordinary income tax on bargain element
  3. (1 + 2) / FMV = # shares to be sold
  4. # Exercised - (3) = # shares received
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20
Q

If nonqual. annuity distributed, which tax rules apply?

A

LIFO

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21
Q

Explain damages available under contributory negligence

A

None

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22
Q

What are the income tax consequences of a loan from a MEC?

A
  1. LIFO. Ordinary income tax on gain (cash surrender - premiums)
  2. If younger than 59-1/2, 10% early withdrawal on gain
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23
Q

Headcounts for COBRA and PBGC

A

20 and 25

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24
Q

Medicare A premium

A

Most people don’t pay because they or a spouse have 40 credits

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25
Q

Explain HO-3 Coverage B

A

Other structures

10% of Coverage A

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26
Q

Built-in Gains tax

A
  • Applies only to S corps that formerly were C
  • Paid by entity, not by shareholdes
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27
Q

Passive activity losses

A
  • May offset only passive gains
  • Phased-out deduction ($25,000/$12,500 S) for rental real estate
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28
Q

1231 Assets

A

Depreciable real or personal property used in a business

  • Capital assets are personal property (vehicle or residence), and are disposed either as a Capital Gain or nondeductible
  • Long-term assets are capitalized (depreciated, amortized, etc) and expensed over its useful life
    • Timber, coal, and iron ore
    • Livestock
    • Unharvested crops
    • Goodwill and intangibles
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29
Q

1231 Gains and Losses

A
  • Losses may be carried forward 5 years
  • Gains are Capital
  • Gains offset by loss carryforwards are Ordinary
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30
Q

Maximum # investors in Private Placement

A

Tony Esposito

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31
Q

How much of a qualified plan’s life insurance payout is subject to income tax?

A

The cash surrender value, less any costs included in income by the decedent during the decedent’s lifetime, is subject to income tax.

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32
Q

Exception to the 21 & 1 Rule

A

2 years, 100% vested

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33
Q

Incidental benefit rule

A
  • <=50% ER contrib to DC for whole life
  • <=25% ER contrib to DC for term or universal
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34
Q

UBTI exclusions

A
  • Leverage for ESOP
    • Royalties
    • Incidental rents
    • Dividends and interest income
    • Gains from the disposition of property
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35
Q

Prohibited actions

A
  • Full-time EE paid extra for svcs to plan
  • >10% DB plan assets in ER stock
  • >10% DB plan assets in real property
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36
Q

50 / 40 Rule

A

DB plans must cover min(40% elig,. 50 EEs)

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37
Q

Determine the Top Heavy test

A
  • Who is a Key EE?
  • Which employers will be treated as single employers?
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38
Q

Explain Top-Heavy

A

>60% balances or accrued benefits to KEEs

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39
Q

Maximum Excess Percentage

A

Min(2x base, Base + 5.7%)

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40
Q

Chapter 14 Rules

A
  1. Section 2702 of Chapter 14 severely limits the advantage of a grantor retained interest trust (GRIT) between related parties by valuing the retained income interest at zero when the transfer is made for the benefit of a member of the transferor’s family, and an interest is retained by the transferor or an applicable family member
  2. Remainder interest valued at FMV as if an outright gift had occurred
  3. Exceptions from the zero value rule:
    • QPRTs
    • GRATs
    • GRUTs, and
    • tangible personal property trusts.
41
Q

Form ADV, Schedule I

A
  • Filed each year
  • Indicates still in business
  • Informs of changes to business
  • Submit a current balance sheet?
42
Q

Stock redemption buy-sell agreement

A
  1. Life ins. proceeds tax-free to business
  2. Bus. buys out decedent’s share
  3. Decedent’s estate does not recognize a taxable gain
43
Q

Max distribution period for EDB

A
  • If Spouse, may roll over or keep taking per decedent’s schedule
  • After decedent began RMDs, Bene’s life expect minus 1 each year
  • Prior to RMDs, may be longer of
    • According to EDB’s expectancy
    • According to decedent’s expectancy
44
Q

Max distribution period for non-EDB

A

10 years

45
Q

Explain SEPs

A

Employer-sponsored IRA or individual annuity

  • Contrib min($57,000, 25% Covered Comp)
  • May be adopted as late as the tax filing date
  • Fully vested and portable
  • May be integrated with SS
  • ER does not have to contribute each year
46
Q

SS Credit in 2020

A

$1,410

47
Q

Describe SIMPLE 401(k)s

A
  • Employer contributions 100% vested
  • Employers may not match less than 3%
  • EEs may not make after-tax contributions
  • No 25% penalty like on SIMPLE IRAs
48
Q

Describe ideal target benefit plan sponsor

A

EEs include older owners and younger rank-and-file

49
Q

Eligible 457 plan

A

Pretax EE contributions are permitted

  1. Public plans
    1. Plan assets in trust, shielded from creditors
    2. May rollover to a 401(k), 403(b), Roth IRA, and other 457
  2. Non-church controlled tax-exempt plans
    1. Not shielded from creditors!
    2. Participation
      1. Church: All EEs
      2. Non-church: Key EEs
    3. Rollover ONLY to other 457
50
Q

Ineligible 457

A

Top-hat plan

  • Similar to other non-qual def. comp
  • Subject to forfeiture
  • Subject to creditors
  • No rollovers!
51
Q

SIMPLE 401(k)

A
  1. No 25% early wd penalty
  2. ER contributions 100% vested
  3. Match cannot be less than 3%
  4. EEs may not contribute after-tax
52
Q

Premature distribution without 10% permitted:

A
  1. Receives QDRO
  2. Receives periodic payments until greater of (5 years, age 59-1/2)
53
Q

Chronically ill

A

2 ADLs

90 days

54
Q

PAP required coverage(s)

A

Liability

That’s it! That’s the list!

55
Q

Pairs and sets

A

Repair or replace any part of the set to its pre-loss value

56
Q

Qualified LTC policy

A
  • Guaranteed renewable
  • Meets consumer protection provisions
  • Limited only to qualified long-term care services
  • Cannot pay for Medicare reimbursable expenses
  • No surrender value or other money that can be borrowed, paid, assigned, or pledged
  • All refunds of premiums or dividends must reduce future premiums or increase future benefits (i.e., no payouts)
57
Q

Activities of Daily Living (ADLs)

A
  1. Bathing
  2. Eating
  3. Dressing
  4. Transferring from bed to chair
  5. Maintain continence
  6. Use the toilet
58
Q

PAP XXX / YYY / ZZ

A

$XXX,000 bodily injury to one person

$YYY,000 for all persons in a single accident

$ZZ,000 property damage in a single accident

59
Q

What will Currently Insured get you?

A

6 credits in last 13 quarters

  1. $255 Death benefit
  2. Survivor benefit if
  • Spouse if caring for child < 16 years old
  • Unmarried child < age 18, < age 19 if still in high school
60
Q

Negligence per se

A
  • Situation in which the act itself constitutes negligence (drunk driving)
  • Injured party does not have to prove negligence
61
Q

Constructive receipt v

Economic benefit rule

A

Constructive receipt

  • When has the ability to access the funds or if the funds are securely set aside

Economic benefit rule

  • Irrevocable transfer of funds made on the executive’s behalf that provides a benefit to the executive
62
Q

Gift of remainder interest

A

Not eligible for annual exclusion!

63
Q

Lapses of General Powers

A

Valued at excess above 5% for three years

64
Q

Adjusted taxable gifts

A

Incl in GE

FMV at date of gift minus annual exclusion

65
Q

Terminable interests and Marital deduction

A

N/A!

Lifetime estates are terminable

Unless spouse is only income recipient of CRAT or CRUT

66
Q

Overqualified

A

Used too much marital deduction, not enough lifetime gifts

67
Q

Reverse QTIP

A
68
Q

Eight General HO Exclusions

A
  1. War
  2. Neglect
  3. Power failure
  4. Water damage
  5. Intentional loss
  6. Nuclear hazard
  7. Earth movement
  8. Ordinance or law
69
Q

Twelve Basic Named Perils

A
  1. Fire
  2. Hail
  3. Theft
  4. Smoke
  5. Aircraft
  6. Vehicles
  7. Lightning
  8. Explosion
  9. Windstorm
  10. Volcanic eruption
  11. Riot or civil commotion
  12. Vandalism or malicious mischief
70
Q

Eighteen Broad Named Perils

A

Basic Named Perils 1–12, plus

  1. Falling objects
  2. Weight of ice, snow, or sleet
  3. Accidental discharge or overflow of water or steam
  4. Sudden and accidental damage from artificially generated electrical current
  5. Freezing of a plumbing, heating, air-conditioning, or automatic fire sprinkler system or of a household appliance
  6. Sudden and accidental tearing apart, cracking, burning, or bulging of a steam, hot water, air-conditioning, or automatic fire protective sprinkler system, or from within a household appliance
71
Q

HO-2 Coverages

A

A Dwelling: Broad

B Other struct: Broad

C Personal Prop: Broad

D Loss of Use: Broad

72
Q

HO-3 Coverages

A

A Dwelling: Open

B Other struct: Open

C Personal Prop: Broad

D Loss of Use: Open

73
Q

HO-4 Renters Coverages

A

A Dwelling: N/A

B Other struct: N/A

C Personal Prop: Broad

D Loss of Use: Broad

74
Q

HO-5 Coverages

A

A Dwelling: Open

B Other struct: Open

C Personal Prop: Open

D Loss of Use: Open

75
Q

HO-6 Condo Coverages

A

A Dwelling: Limited

B Other struct: N/A

C Personal prop: Broad

D Loss of use: Broad

76
Q

HO-8 Coverages

A

A Dwelling: Basic

B Other struct: Basic

C Personal Prop: Basic

D Loss of Use: Basic

77
Q

HO 4, 6, 8

A

Renter’s

Condo

Historical homes

78
Q

Biggest difference between HO 3, 5, and 15

A

HO 3 broad form (used to be most prevalent)

HO 5 open peril on everything

HO3 can be endorsed to make it an HO 5

79
Q

Terms of COBRA coverage

A

18 mos: Termination, or Reduction in hours

29 mos: EE or bene meets SS def. disabled

36 mos: Death, Separation, Divorce, Benes when EE Medicare

80
Q

Gift loans of $10,000 or less

A

Not subject to gift tax

unless donee uses to invest in income-producing property

81
Q

Uniform Probate Code

A
  • Revokes any will provisions regarding a former spouse by subsequent divorce or annulment
82
Q

AGI Contribution Limits for

Private Nonoperating Foundations

A

30% Cash or Ord. income

20% any other type

83
Q

AGI Limits for Public Charities

A

Cash: 60%

Ord. or Tang. Unrelated: 50% min(FMV, basis)

Intang, Related, Real: 30% FMV or 50% Basis

84
Q

HCE 414(q)

A

>5% owner

  • OR -

Comp > $125,000

85
Q

Key EE 416(i)

A
  • 5% Owner
  • 1% Owner & Comp > $150,000
  • Officer & Comp > $180,000
86
Q

Average Deferral Percentage (ADP) rules

A

NHC: ≤2%

HCE: 2xNHC

NHC: >2% but ≤8%

HCE: NHC + 2%

NHC: >8%

HCE: 1.25 * NHC

87
Q

Average Contribution Percentage (ACP) rules

A

NHC: ≤2%

HCE: 2xNHC

NHC: >2% but ≤8%

HCE: NHC + 2%

NHC: >8%

HCE: 1.25 * NHC

88
Q

Safe Harbor Matching

A

Obviates need to meet ADP/ADC testing

Match must be 100% vested

89
Q

Safe Harbor Matching Pctgs

A

0% / 0%

1% / 1%

2% / 2%

3% / 3%

4% / 3.5%

5%+ / 4%

90
Q

Perils covered

A

1 - 12: 1, 8

1 - 18: 2, 4, 6, (3 on personal property)

All except excl.: 5, (3 on buildings)

91
Q

Liability limits

A

Comprehensive: $100,000

Damage to others’ prop: $250 to $500

Med. pmts. to others: $1,000

92
Q

Eight General HO Exclusions

A
  1. War
  2. Neglect
  3. Power failure
  4. Water damage
  5. Intentional loss
  6. Nuclear hazard
  7. Earth movement
  8. Ordinance or law
93
Q

Twelve Basic Named Perils

A
  1. Fire
  2. Hail
  3. Theft
  4. Smoke
  5. Aircraft
  6. Vehicles
  7. Lightning
  8. Explosion
  9. Windstorm
  10. Volcanic eruption
  11. Riot or civil commotion
  12. Vandalism or malicious mischief
94
Q

Eighteen Broad Named Perils

A

Basic Named Perils 1–12, plus

  1. Falling objects
  2. Weight of ice, snow, or sleet
  3. Accidental discharge or overflow of water or steam
  4. Sudden and accidental damage from artificially generated electrical current
  5. Freezing of a plumbing, heating, air-conditioning, or automatic fire sprinkler system or of a household appliance
  6. Sudden and accidental tearing apart, cracking, burning, or bulging of a steam, hot water, air-conditioning, or automatic fire protective sprinkler system, or from within a household appliance
95
Q

New Comparability Plan

A
  • DC, either Money Purchase or profit-sharing
    • Contrib favor HCE
    • Owner/Exec. class may contrib limit $57K
  • Works well with different aged owners
  • May define classes in different ways
    • Service
    • Title
    • Division
    • Comp
    • Age
    • Class
    • Combo
  • If fails nondiscrim, shift alloc to non-HCE one at a time until passes
96
Q

ER contrib into Roth 401(k)?

A

Not permitted

May convert later

97
Q

All inherited property is

A

Long-term

98
Q

At-risk rules

A

Deduct loss only up to amount at-risk

Suspend rest

99
Q

Transfer-for-value exceptions

A
  1. transfers to the insured
  2. transfers to a partner of the insured
  3. transfers to a partnership in which the insured is a partner
  4. transfers to a corporation in which the insured is an officer or shareholder
  5. transfers to a transferee (such as a child), whose basis in the policy is determined by reference to the transferor’s basis (tax-free exchange or gift)

CGT (6 decks)

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