Unit 10 Flashcards
The trustee is responsible for reporting all income, gains, and losses of a trust to the IRS on Form:
1041
Which type of joint ownership provides each owner with an undivided interest in the property
Tenants in Common
How is a person’s marginal tax bracket determined?
By reviewing the IRS schedule
The advantages of investing in a limited partnership include:
the ability to limit risk.
If an ERISA plan participant fails to specify how her savings are invested, the plan sponsor must place the funds in…….
a qualified default investment alternative
For a person who’s interested in establishing a small company that will carry few liabilities (i.e., debt), the best form of business is a __________________.
sole proprietorship
What is a benefit of forming a limited partnership?
Ease of establishment
A __________ trust is permitted to retain some of its investment income.
complex
Which of the business structures allows the pass-through of income and loss to its members on a Form K-1?
LLC’s
*Limited Partnerships and S-Corp’s report their income on form K-1 too, but they aren’t called members!!
An individual may start taking Social Security benefits once she reaches age ___. However, if she waits, she will receive larger payments. Once an individual begins taking benefits, she locks in the base amount that she will receive.
62
Per capita
A per capita distribution of an estate ensures that each member of a generation will receive the same amount as any other.
Per stirpes
Per stirpes distributions are done per branch of a family and, in some instances, members of the same generation of a family will receive different amounts from an estate.
The benefit of creating an irrevocable trust is that:
Assets will be excluded from the donor’s estate
A business with only one owner, who is responsible for all of the liabilities of the business and management decisions, is called a………..
sole proprietorship
What’s the unified tax credit for estate and gift taxes?
$12.92 million
As it relates to gift and estate taxes, what’s portability?
The ability for a surviving spouse to use the deceased spouse’s unused lifetime gift tax exclusion
___________ represent an increase in Medicare premiums for individuals who earn over a specified amount. This results in an increase in the total Medicare expenses.
Income-related monthly adjustment amounts (IRMAA)
Which non-qualified deferred compensation plan can be offered to managers of a government agency?
457
An individual investor may contribute up to ______ per year to a person’s 529 plan without incurring federal gift taxes.
$17,000
529’s offer a unique benefit in that donors may aggregate _ years’ worth of annual gifts
5
Sole Proprietorship:
Liability - (unlimited or limited?)
Taxes - (flow-through or double?)
Setup - (easy or complex?)
Continuity of life - (yes or no?)
How many proprietors?
Liability - Unlimited
Taxes - flow-through
Setup - easy
Continuity of life - no
How many proprietors? 1
General Partnership:
Liability - (unlimited or limited?)
Taxes - (flow-through or double?)
Setup - (easy or complex?)
Continuity of life - (yes or no?)
How many partners?
Liability - unlimited
Taxes - flow-through
Setup - easy
Continuity of life - no (will be dissolved due to death or disability of any partner)
How many partners? 2 or more
Limited Partnership:
Liability - (unlimited or limited?)
Taxes - (flow-through or double?)
Setup - (easy or complex?)
Continuity of life - (yes or no?)
How many partners?
Liability - Limited for limited partners; unlimited for general partners
Taxes - flow-through
Setup - easy
Continuity of life - no
How many partners? at least one general partner and at least one limited partner
C-Corporation:
Liability - (unlimited or limited?)
Taxes - (flow-through or double?)
Setup - (easy or complex?)
Continuity of life - (yes or no?)
How many shareholders?
Liability - limited
Taxes - double :(
Setup - complex
Continuity of life - yes
How many shareholders? Unlimited
S-Corporation:
Liability - (unlimited or limited?)
Taxes - (flow-through or double?)
Setup - (easy or complex?)
Continuity of life - (yes or no?)
How many shareholders?
Liability - limited
Taxes - flow-through
Setup - complex - but not as complex as a C-Corp
Continuity of life - yes
How many shareholders? No more than 100 US shareholders
LLC:
Liability - (unlimited or limited?)
Taxes - (flow-through or double?)
Setup - (easy or complex?)
Continuity of life - (yes or no?)
How many members?
Liability - limited
Taxes - flow-through
Setup - easy
Continuity of life - no
How many members? One or more
A _____ is a court order that provides an alternative payee the right to receive all or a portion of the benefits that are payable to a participant under a qualified retirement plan
QDRO (qualified domestic relations order)
Government sponsored entities, such as _____________________, are not backed by the full faith and credit of the U.S. government. Instead, their securities represent the loans of agencies that were created by the U.S. government
Freddie Mac and Fannie Mae
Income that’s generated in a revocable trust is taxed at the ___________’s tax rate
grantor’s tax rate
In a ________ account, each owner’s interest in the account will pass to her estate upon death.
Joint tenants in common (TIC)
Community property is a way to own assets, but it’s only available to _________________________.
married couples or domestic partners
A _______ trust is required to distribute all its income to beneficiaries in the year received.
simple
Is an individual required to have an annual gross income below a certain level to contribute to a Roth 401(k) plan?
No
A limited partnership requires at least one _________ partner.
general
One way that an IRA owner won’t be charged an early penalty for withdrawal is due to the birth or adoption of a child. The limit for this is $_____
$5,000
A limited partnership is created by filing a ____________________ with a state or local agency.
Certificate of Limited Partnership
(this sounds like a trick question but isn’t)
When does a person become eligible for Social Security benefits?
After she’s worked 40 quarters
The investment policy statement of a qualified retirement plan describes the plan’s _______ and ______.
investment objectives and strategies
Are Section 457 plans required to follow ERISA guidelines?
No, because they’re non-qualified plans.
The death benefit from a life insurance policy is taxable to the _______________.
deceased’s estate
Max contribution for a Simple 401k
$12,500
Beneficiaries are taxed on income that’s distributed by a trust, but not taxed on the ______________ that remains in the trust.
principal
_______ plans are tax-deferred retirement plans that may only be established by certain tax-exempt, non-profit organizations, such as churches and public school systems.
403(b)
These plans are a type of non-qualified retirement plan that may only be established by state and local government entities and certain non-profit organizations.
457 Plans
When an investor has net short-term capital gains, the gains are taxed at the investors’ ______________.
ordinary income rate
A long-term capital gain (held more than 1 year) the maximum rate it’s taxed at is ___
20%
