Unit 15- Ethics/Taxation

Question 1

Selling away

Answer 1

When you make a private securities transaction

Question 2

Churning

Answer 2

excessive trading in customers account to generate commisions

Question 3

Reverse Churning

Answer 3

Placing in fee based account despite few transactions

Question 4

What price can compensation not exceed?

Answer 4

$100

Question 5

What type of gifts are prohibited?

Answer 5

season tickets and vacations

Question 6

Painting the Tape

Answer 6

transaction occurs with understand that stock will be repurchased at the same price later in the day, creating the perception of volume

Question 7

Constant Dollar Plan

Answer 7

a fixed dollar amount is invested at any given time. If market value rises, excess is sold vice versa

Question 8

Constant Ratio Plan

Answer 8

a fixed ratio of asset allocation

Question 9

tactical asset allocation

Answer 9

short-term portfolio adjustments that adjust asset allocation in consideration of current market conditions

Question 10

Regressive Taxes

Answer 10

levied equally regardless of income

Question 11

Progressive Taxes

Answer 11

tax rate increases as income increases

Question 12

What type of Income is: SALARY

Answer 12

Earned

Question 13

What type of Income is: bonuses

Answer 13

Earn

Question 14

What type of Income is: Rental Property

Answer 14

Passive

Question 15

What type of Income is: LPs

Answer 15

Passive

Question 16

What type of Income is: Active Participation in trade or business

Answer 16

Active

Question 17

What type of Income is: enterprises not actively involved in

Answer 17

Passive

Question 18

What type of Income is: Dividends

Answer 18

Portfolio

Question 19

What type of Income is: Net Capital Gains

Answer 19

Portfolio

Question 20

What $ amount of net capital losses can offset income each year?

Answer 20

$3,000

Question 21

Who taxes Fannie Mae and Freddie Mac securities?

Answer 21

All Levels

Question 22

When are mutual fund distributions taxed?

Answer 22

the year of distributions

Question 23

Are stock dividends or stock splits taxable?

Answer 23

No- but they lower cost basis

Question 24

How are short term gains taxed?

Answer 24

ordinary income

Question 25

What is the holding period for short term gains?

Answer 25

12 months or less

Question 26

wash sale

Answer 26

sells the security at a gain/loss and then repurchases the same security within 30 days before/after trade date reporting loss MAY NOT USE CAPITAL LOSSES TO OFFSET ANY GAINS

Question 27

When you rollover loss to identical security's cost basis, how do you calculate new cost basis?"

Answer 27

When long, add to the cost basis | when short, subtract from cost basis

Question 28

On a muni bond purchased as OID, the effective after tax yield is also the:

Answer 28

Stated yield to maturity

Question 29

On a muni bond purchased on the secondary market, the effective after tax yield is:

Answer 29

between the stated yield to maturity and the coupon

Question 30

Shorting against the box

Answer 30

originally used to lock in capital gain. Instead of selling long shares, investor borrows the same shares and sells them short. Bc borrowed shares were sold, no tax event

Question 31

If a new issue muni bond is bought at a discount, it MUST/MUST NOT be accreted.

Answer 31

MUST

Question 32

If a new issue muni bond is bought at a discount, at maturity there IS/IS NOT a capital gain?

Answer 32

IS NOT