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CFP additional cards > Terms that you can't miss > Flashcards

Terms that you can't miss Flashcards

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1
Q

<p>List all the guidelines of an IPS<br></br>
<br></br>
RRTTLLU</p>

A 
<p>Risk<br>
target Return<br>
Tax<br>
Time<br>
Liquidity<br>
Legal considerations<br>
Unique Circumstances</p>
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2
Q

Price to earning ratio

EPS

A

Price of the stock/Earnings per share

How much investors are willing to pay for each $ of earnings

EPS= (Net Income-Preferred Dividends)/# of common shares outstanding

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3
Q

<p>267 Sale</p>

A

<p>This is the sale of loss property to a related party. Brother/parents/grandparents. Basically you don't get a deduction and the buyer uses the double basis. So FMV for a loss or basis as a gain.</p>

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4
Q

<p>Section 1033</p>

A

<p>Deferal of gain on your property due to destruction/gov takeover
<br></br>
<br></br>2 years to reinvest proceeds due to storm
<br></br>
<br></br>3 years if done by the gov</p>

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5
Q

<p>Qualified Employee Discounts</p>

A

<p>Service = 20%
<br></br>
<br></br>If you are at a dentist and they give you a cleaning for $80 when it normally costs $100, no income included. Anything more will need to be included for the difference
<br></br>
<br></br>Products = % dependent on profit margin
<br></br>
<br></br>Same rule for the profit margin that % determines the floor for the amount to be included in income</p>

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6
Q

<p>What makes up Net Investment Income</p>

A

<p>STCG + Non Qualified Dividends + Interest
<br></br>
<br></br>Does not include LTCG or Qualified Dividends</p>

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7
Q

<p>What is the penalty for filing a fraudulent tax return?</p>

A

<p>75% of the deficiency</p>

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8
Q

<p>What is a testamentary trust</p>

A

<p>It is a trust that is created by a will. Goes through the probate process and is funded based on the trust document</p>

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9
Q

<p>What is a complex trust?</p>

A

<p>The Section 2503(b) is a simple trust. A complex trust is a non-grantor trust which in a given year accumulates fiduciary income or distributes trust corpus, whereas a simple trust distributes no corpus. A 2503(c) trust allows for accumulation.</p>

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10
Q

<p>Adoption Credit</p>

A

<p>Credit capped at expenses that exceed 14,440
<br></br>
<br></br>Child must be under age 18 or handicapped
<br></br>
<br></br>Phase out: 216 -256</p>

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11
Q

<p>When is the 5500 due?</p>

A

<p>The 7th month after the plan year ends. An extension made be filled</p>

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12
Q

<p>Which plans can't be integrated with SS?</p>

A

<p>4 01k
<br></br>4 03b/457
<br></br>S arsep
<br></br>T raditional IRA
<br></br>R oth IRA
<br></br>E SOP
<br></br>S IMPLE</p>

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13
Q

<p>What does it mean to be a safe harbor 401k?</p>

A

<p>No ADP/ACP testing is required
<br></br>
<br></br>The plan must either provide a match of 3%/50% up tp 5%
<br></br>
<br></br>OR non elective of 3% to all eligible
<br></br>
<br></br>ER contributions are 100% vested</p>

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14
Q

<p>Amount to be taken for loans</p>

A

<p>Based on vested amount
<br></br>
<br></br>0-20k = lesser of 10K or account balance
<br></br>20-100K = 50%
<br></br>>100K = 50K
<br></br>
<br></br>5 year payback unless for home.</p>

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15
Q

<p>How would you calc the TVM for serial payments?</p>

A

<p>Same calc as you would do for the payment included the difference from inflation. The difference for this is the end of year payment asked that would increase for inflation. So once you get your PMT take that number and multiply by 1.xx to account for the increase</p>

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16
Q

<p>If financial advice, what is required to be provided?</p>

A

<p>Material Info - compensation/products/services/bankruptcy history
<br></br>
<br></br>Privacy policy
<br></br>
<br></br>Conflicts of interest
<br></br>
<br></br>Other requirements (how other parties will be compensated/websites to previous history for a bankruptcy/felonies)
<br></br>
<br></br>ONLY CONFIDENTIALLY AND PRIVACY POLICY MUST BE IN WRITING</p>

17
Q

<p>If financial planning, what is required to be provided?</p>

A

<p>Material Info - compensation/products/services/bankruptcy history
<br></br>
<br></br>Privacy policy
<br></br>
<br></br>Conflicts of interest
<br></br>
<br></br>Term of the engagement
<br></br>
<br></br>Other requirements (how other parties will be compensated/websites to previous history for a bankruptcy/felonies)
<br></br>
<br></br>ALL MUST BE IN WRITING BESIDES CONFLICT OF INTEREST</p>

18
Q

<p>For a bankruptcy, what assets are protected/which debts are not discharged</p>

A

<p>Protected:
<br></br>IRA that was rolled over
<br></br>IRA = 1.3M cap
<br></br>Qualified plans/Life Insurance
<br></br>Alimony/Child Support
<br></br>
<br></br>No discharge:
<br></br>Last 3 years of taxes due
<br></br>Alimony/Child Support Payments
<br></br>Student Loans</p>

19
Q

<p>Limit excluded from income on education reimbursement</p>

A

<p>$5,250</p>

20
Q

<p>Dividend Payout Options</p>

A

<p>CRAPO
<br></br>
<br></br>Cash
<br></br>Reduce Future Premiums
<br></br>Accumulate at interest
<br></br>Purchase of Paid up permanent additions
<br></br>One year term</p>

21
Q

<p>Surrender Options for insurance</p>

A

<p>Cash
<br></br>Use as single premium paid up life insurance
<br></br>Use to buy extended term</p>

22
Q

<p>Exceptions to transfer for value</p>

A

<p>Transfer to the insured
<br></br>Transfer to your business partner
<br></br>Transfer to your business that you are a partner
<br></br>Transfer to corporation of the insured</p>

23
Q

<p>Everything you need to know for cobra</p>

A

<p>Not required if less than 20 EEs
<br></br>
<br></br>Part time EEs count as half
<br></br>
<br></br>18 months of coverage for anything related to change of employment (misconduct not covered but insubordination is)
<br></br>
<br></br>29 months for disability
<br></br>
<br></br>36 months for everything else (Death/Kids/Plan Termination/Divorce)
<br></br>
<br></br>60 day filing requirement
<br></br>
<br></br>102% of premiums allowed to be charged</p>

24
Q

<p>Section 1&2 of a homeowners policy</p>

A

<p>Section 1 (DOPL)
<br></br>A - Dwelling
<br></br>B - Other Structures (detached garage)
<br></br>C - Personal Property
<br></br>D - Loss of use
<br></br>
<br></br>Section 2
<br></br>E - Personal Liability
<br></br>F - medical payments to others</p>

25
Q

<p>Exclusions for All HO policies (7 of them)<br></br>
<br></br>
Make sure we check this before the calc for payment</p>

A 
<p>Flood<br>
Earthquake<br>
Nuke/warfare<br>
Your own neglect<br>
Personal wrongdoing<br>
Law (required construction)<br>
Power Failure</p>
26
Q

<p>Detail the HO policies</p>

A

<p>HO1 = (A) Basic / (B) Basic / (C) Basic / (D) Basic</p>

<p>HO2= (A) Broad/ (B) Broad/ (C) Broad/ (D) Broad</p>

<p>HO3(Best option if no HO5)= (A) Open/ (B) Open/ (C) Broad/ (D) Open/broad</p>

<p>HO4 (4RENT!)= (A) N/A/ (B) N/A/ (C) Broad/ (D) Broad</p>

<p>HO5 (BEST)= (A) Open/ (B) Open/ (C) Open/ (D) Open</p>

<p>HO6 (CONDO)= (A) Broad/ (B) N/A/ (C) Broad/ (D) Broad</p>

<p>HO8 (OLD HOUSES)= (A) Basic / (B) Basic / (C) Basic / (D) Basic</p>

27
Q

Payment for medicare

A

<p>0-60 days = 1,484</p>

<p></p>

28
Q

Payment of social security for bene

A

If still alive

50% for wife and the kids

Survivorship

100% to spouse at FRA
75% to kids under 18
75% to spouse if child under 16
75/82.5% to parent at least 62

Disability
100% to owner
50% to kids and wife

29
Q

What does medicare not cover?

A 
Dental
Cosmetic
Hearing Aids
Eye Exams
Annual Wellness visit 
Custodial Care
30
Q

Coefficient of Variation (CV)

A

How much risk per unit of return. Used to compare two assets with different avg returns

STD/Avg Return = CV

Higher = More risk

31
Q

Correlation Coefficient (r)

A

Compares how likely 2 assets will move together.

-1 to 1

32
Q

Coefficient of Determination (r2)

A

Tells us the % of the investment return that is based on benchmark

If less than 70 use Sharpe Ratio

Example of how to view this. r2= 81%. We know that 81% of the performance was due to the benchmark or for better words systematic risk. The remaining 19% will be unsystematic factors.

33
Q

Covariance

A

Measure of 2 securities combined. Compares their relative risk.

COV= std astd b Correlation coefficient of ab(their r)

34
Q

Test for a qualifying child

A

Age (under 19 or student under 24)
Support
Adobe (lived with taxpayer longer than half year)
Relationship

35
Q

Test for qualifying relative

A

Relationship (don’t forget this one can be someone who lived with you all year even if not related, so cousin would count in that regard)

Support

Gross Income

Qualifying child test (can’t be a dependent for anyone else)

36
Q

What makes social security taxable?

A

MAGI + 1/2 of SS benefits = threshold

Single
0-25 = 0%
25-32= 50%
32>=85%

Married
0-32=0%
32-44 = 50%
44>85%

37
Q

Deductions still allowed that are not subject to 2%

A

Gambling losses netted to winnings
IRD
Annuity losses if you die b4 all taken

38
Q

Charity Deductions

A

Cash = 100%

STCG/OI Property/All loss property/Tangible (unrelated use) = lesser of basis or AGI of 50%

LTCG/Real/Tangible(related use) = 30% if FMV or 50% if basis

CFP additional cards (8 decks)

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