Unit 10 Flashcards

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1
Q

The trustee is responsible for reporting all income, gains, and losses of a trust to the IRS on Form:

A

1041

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2
Q

Which type of joint ownership provides each owner with an undivided interest in the property

A

Tenants in Common

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3
Q

How is a person’s marginal tax bracket determined?

A

By reviewing the IRS schedule

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4
Q

The advantages of investing in a limited partnership include:

A

the ability to limit risk.

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5
Q

If an ERISA plan participant fails to specify how her savings are invested, the plan sponsor must place the funds in…….

A

a qualified default investment alternative

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6
Q

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 __________________.

A

sole proprietorship

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7
Q

What is a benefit of forming a limited partnership?

A

Ease of establishment

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8
Q

A __________ trust is permitted to retain some of its investment income.

A

complex

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9
Q

Which of the business structures allows the pass-through of income and loss to its members on a Form K-1?

A

LLC’s
*Limited Partnerships and S-Corp’s report their income on form K-1 too, but they aren’t called members!!

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10
Q

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.

A

62

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11
Q

Per capita

A

A per capita distribution of an estate ensures that each member of a generation will receive the same amount as any other.

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12
Q

Per stirpes

A

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.

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13
Q

The benefit of creating an irrevocable trust is that:

A

Assets will be excluded from the donor’s estate

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14
Q

A business with only one owner, who is responsible for all of the liabilities of the business and management decisions, is called a………..

A

sole proprietorship

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15
Q

What’s the unified tax credit for estate and gift taxes?

A

$12.92 million

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16
Q

As it relates to gift and estate taxes, what’s portability?

A

The ability for a surviving spouse to use the deceased spouse’s unused lifetime gift tax exclusion

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17
Q

___________ represent an increase in Medicare premiums for individuals who earn over a specified amount. This results in an increase in the total Medicare expenses.

A

Income-related monthly adjustment amounts (IRMAA)

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18
Q

Which non-qualified deferred compensation plan can be offered to managers of a government agency?

A

457

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19
Q

An individual investor may contribute up to ______ per year to a person’s 529 plan without incurring federal gift taxes.

A

$17,000

20
Q

529’s offer a unique benefit in that donors may aggregate _ years’ worth of annual gifts

A

5

21
Q

Sole Proprietorship:

Liability - (unlimited or limited?)
Taxes - (flow-through or double?)
Setup - (easy or complex?)
Continuity of life - (yes or no?)
How many proprietors?

A

Liability - Unlimited
Taxes - flow-through
Setup - easy
Continuity of life - no
How many proprietors? 1

22
Q

General Partnership:

Liability - (unlimited or limited?)
Taxes - (flow-through or double?)
Setup - (easy or complex?)
Continuity of life - (yes or no?)
How many partners?

A

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

23
Q

Limited Partnership:

Liability - (unlimited or limited?)
Taxes - (flow-through or double?)
Setup - (easy or complex?)
Continuity of life - (yes or no?)
How many partners?

A

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

24
Q

C-Corporation:

Liability - (unlimited or limited?)
Taxes - (flow-through or double?)
Setup - (easy or complex?)
Continuity of life - (yes or no?)
How many shareholders?

A

Liability - limited
Taxes - double :(
Setup - complex
Continuity of life - yes
How many shareholders? Unlimited

25
Q

S-Corporation:

Liability - (unlimited or limited?)
Taxes - (flow-through or double?)
Setup - (easy or complex?)
Continuity of life - (yes or no?)
How many shareholders?

A

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

26
Q

LLC:

Liability - (unlimited or limited?)
Taxes - (flow-through or double?)
Setup - (easy or complex?)
Continuity of life - (yes or no?)
How many members?

A

Liability - limited
Taxes - flow-through
Setup - easy
Continuity of life - no
How many members? One or more

27
Q

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

A

QDRO (qualified domestic relations order)

28
Q

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

A

Freddie Mac and Fannie Mae

29
Q

Income that’s generated in a revocable trust is taxed at the ___________’s tax rate

A

grantor’s tax rate

30
Q

In a ________ account, each owner’s interest in the account will pass to her estate upon death.

A

Joint tenants in common (TIC)

31
Q

Community property is a way to own assets, but it’s only available to _________________________.

A

married couples or domestic partners

32
Q

A _______ trust is required to distribute all its income to beneficiaries in the year received.

A

simple

33
Q

Is an individual required to have an annual gross income below a certain level to contribute to a Roth 401(k) plan?

A

No

34
Q

A limited partnership requires at least one _________ partner.

A

general

35
Q

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 $_____

A

$5,000

36
Q

A limited partnership is created by filing a ____________________ with a state or local agency.

A

Certificate of Limited Partnership

(this sounds like a trick question but isn’t)

37
Q

When does a person become eligible for Social Security benefits?

A

After she’s worked 40 quarters

38
Q

The investment policy statement of a qualified retirement plan describes the plan’s _______ and ______.

A

investment objectives and strategies

39
Q

Are Section 457 plans required to follow ERISA guidelines?

A

No, because they’re non-qualified plans.

40
Q

The death benefit from a life insurance policy is taxable to the _______________.

A

deceased’s estate

41
Q

Max contribution for a Simple 401k

A

$12,500

42
Q

Beneficiaries are taxed on income that’s distributed by a trust, but not taxed on the ______________ that remains in the trust.

A

principal

43
Q

_______ 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.

A

403(b)

44
Q

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.

A

457 Plans

45
Q

When an investor has net short-term capital gains, the gains are taxed at the investors’ ______________.

A

ordinary income rate

46
Q

A long-term capital gain (held more than 1 year) the maximum rate it’s taxed at is ___

A

20%

47
Q
A