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CFP Wrong Answer > Wrong answer Final Testz > Flashcards

Wrong answer Final Testz Flashcards

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CFP® flashcards
1
Q

Excess Alimony

A

Under the IRC, the excess alimony payment for the second year is the amount that exceeds the third year by more than $15,0000.

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2
Q

Joint and Last Survivor Table

A

Only available for husband and wife, generally more favorable than the new uniform life expectancy table with non spouses.

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3
Q

Rental Apartment Building Tax

A

Enables depreciation deduction to offset rental income on an asset than can appreciate in value. Can be classified as tax deferred

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4
Q

US Savings Bonds tax Treatment

A

If parents purchase the bonds in the name of their kids, then their AGI would factor into determining the tax treatment at redemption.

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5
Q

FLP Gifting

A

Transfers limited partner interests to family members, can also help qualify for lack of marketability and lack of control discounts.

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6
Q

MEC distributions

A

Cash value - basis = amount that is subject to ordinary income

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7
Q

Real Estate Sale Tax Rate

A

25% tax rate attributable to deprivation recapture

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8
Q

Recapitalization Gift Tax

A

The value of the common stock gift will be based on dividends paid on the preferred stoxk. The difference between the FMV of the corporation and the aggregate value of the preferred shares.

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9
Q

Put feature on a bond

A

Matters if an investor thinks interest rates will decline

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10
Q

Credit vs Deduction

A

Credit is more valuable to a low bracket taxpayer than a deduction would be

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11
Q

Coverdell and 529 Aggregate Contributions

A

Not affected by one or another

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12
Q

Order of Events for a complaint

A

Generally begins with the broker dealers compliance department. If the firm is unresponsive or disagrees with the claim, the arbitration should be pursued through FINRA

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13
Q

Corporate AMT

A

Repealed in the TCJA

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14
Q

NOLs

A

Only 50% of current tax year income can be offset with an NOL carry forward. With the remainder continuing to carry forward

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15
Q

Ineligible for 1031 like kind exchange

A

Equipment, intangibles and personal property are ineligible

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16
Q

QBI deduction

A

20% of income, below the line deduction, phased out for service companies, c corps not eligible

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17
Q

CFP Ethics CE

A

Two hours every two years

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18
Q

Retirement Savers Contribtution Credit

A

Designed for low moderate income taxpayers 1!4 marches a percentage based on AGI of the taxpayers IRA, retirement plans, or ABLE accounts but not 529s.

Max credit is 2k single and 4k joint and no credit is available for taxpayers over 38k single and 76,500 MFJ

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19
Q

What is funded under a VEBA?

A

Death Benefits, Medical Benefits and Unemployment Benefits

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20
Q

Who experiences a step up in baris in a buy sell transaction?

A

Both the estate of the insured and the surviving owner.

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21
Q

Lifetime Learning and AOTC phaseout

A

145k-175k

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22
Q

Cobra effects from divorce

A

Ex spouse is covered for 36 months, children stay on group plan.

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23
Q

Best insurance strategy when a business closes

A

Sell the cross purchase or entity purchase to the insured to not trigger transfer for value

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24
Q

Who pays GSTT in a taxable termination?

A

The trustee pays any GSTT owed on a transfer to a skip person.

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25
Q

Stock Bonus Plans

A

Can be integrated with social security, esops cannot

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26
Q

Insured S Corp Disability Benefits

A

Always receive tax free disability benefits

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27
Q

Section 404a limit on deductible contributions relative to controlled groups

A

25% of salary between two control plans

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28
Q

Annuity payments tax rate if it exceeds the term

A

100% are taxable

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29
Q

Death benefits paid by an employer

A

Incredible in gross income

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30
Q

Calculating basis for a sale of property to charity for a discount

A

(Sale price to charity / FMV) x original basis
= adjusted basis.

Under a bargain sale to charity to basis is adjusted because the difference between FMV of the property represent a charitable gift rather than a sale.

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31
Q

Disclosure of gifts from referrals

A

In cash referrals must be disclosed but minimal gifts like fruit or candy may not be disclosed

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32
Q

NPV

A

A positive or negative NPV tells us whether the client achieved his required rate of return. A NPV of 0 means that the investment met the required rate of return

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33
Q

MEC Income First Dividend Distributions

A

Cash dividends and dividends used to pay off policy loans are considered income first distributions

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34
Q

SEC Registered Investment Advisors Annual AVD Update

A

Within 90 days following the close of their fiscal year. Smaller advisors will comply with state specific deadlines

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35
Q

FICA and FUTA

A

Qualified and non qualified plans are subject, section 125 is not

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36
Q

Transfer for value exceptions

A

Applied when a life insurance policy on an insured is sold, it’s not taxable if it is transferred to:

-insured
-corporate in which insured is a shareholder
-partnership the shareholder is involved in
-divorce

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37
Q

K-1 Income from an SCorp

A

A distribution of profits and thus is treated as investment income. Even if the participant is active

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38
Q

Calculating weighted beta

A

Identify the percentage that each stock represents of the total amount. So for example

20% of “A” times beta of 1.5

And so on.

Then add the individual betas together to arrive at the weighted portfolio

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39
Q

Martial Deduction Qualifications

A

Donee spouse must be given the property outright or must have at least a right to the income from the property and a general power of appointment over the principal.

40
Q

Recapture on substantially equal payments after 59

A

10% penalty only applies to payments made before 59 1/2

41
Q

Replacement value of home

A

Look for FMV. Reduced by land value if given in answer.

42
Q

Corporate earnings generally do not include

A

Profitability projections

43
Q

Prepaid tuition plans

A

Better for less risk averse investors. They cover tuition and mandatory fees, the do not cover room and board. They do not affect expected family contributions

44
Q

Disability Benefits under salary continuation plan

A

This is a group plan. The benefits would be taxable as income to to the participant

45
Q

H0-15 endorsement

A

Provides increased limits on property and higher sub limits on on jewelry and furs.

46
Q

Forms of Discipline for CFP Board

A

Private censure
Public letter of admonition
Suspension
Revocation

47
Q

life Insurance trust grantor rules

A

If any portion of the trust income is or may be used to purchase insurance on the life of the grantor then the trust is a grantor trust

48
Q

Disclaimer Trusts

A

Many written wills contain a provision that allow a spouse the ability to put specific disclaimed assets into trust. Provisions can be put to allow the trust to provide retailer payouts or the ability to occupy property. It’s essentially a credit shelter trust that gets the assets out of the estate

49
Q

HSAs used for LTC

A

Can be used to pay for qualified LTC premiums that are age based

50
Q

Red Herring

A

A red herring omits the selling price and size of the issue, it is in on the front page of the prospectus

51
Q

Red Herring

A

A red herring omits the selling price and size of the issue, it is in on the front page of the prospectus

52
Q

SEPR

A

-supplemental executive retirement plan
-informally funded to provide benefits that greatly exceed those provided by a normal retirement plan
-also called a top hat plan

53
Q

Medicare and HSA

A

Only when enrolled in Medicare does an individual become ineligible for HSA, not when eligible for Medicare

54
Q

Tax Deduxtion for work of art created by a taxpayer

A

Limited to basis which would be the cost of making the artwork

55
Q

Items that can be depreciated rather than expensed in a rental property

A

Generally equipment or new features to the property

56
Q

Section 1244 qualifications

A

For MFJ, must be a business under 1 million in start up, and allows for a 100k write off first year against ordinary income

57
Q

Life settlement keys

A

Look for capital gains answer
Income is characterized as ordinary income to the extent the cash value exceeds the premium paid.

58
Q

Purposes of immunizing a bond portfolio

A

-reduce the bond portfolios market losses
-earn a specific rate of return from the bond portfolio over a given period of time, regardless of what happens to interest rates
-offset interest rate with reinvestment rate risk

59
Q

FSA Keys

A

May receive contributions from an eligible person
-contributions are not subject to FICA
-Allowed contributions are not included in income

60
Q

Self Employed Mandorty Filing Requirment

A

Must file a schedule SE if net earnings are $400 or more.

61
Q

MSA Keys

A

-May receive contributions from any person, including an employer or family member, on behalf of an eligible person.
-contributions by the eligibilible individual are deductible even if that person does not itemize
-employer contributions are not included in the eligible persons income.

62
Q

Section 179 election

A

An election to expense the cost of certain assets
-available for tangible personal property

63
Q

Difference between QTIP and Bypass trust

A

QTIP gives spouse right to all income, bypass gives spouse right to HEMS income

64
Q

Qualifying Widow tests

A

Must meet one of the criteria:

-maintains the home
-has a dependent child
-filed a joint return prior year
-did not remarry

65
Q

APL

A

Automatic premium loan, the provision will pay the premium if it remains unpaid beyond the grace period.

66
Q

Actual cash value (insurance)

A

Replacement value (even when there is an increase) minus depreciation

67
Q

FSA Plans and LTC

A

Can’t use FSA funds for LTC premiums

68
Q

QDRO Applies to

A

QDROs may not only apply to 401ks but also child support and alimony

69
Q

Section 2032 keys

A

-allows an executor to elect to tablue a farm for federal estate tax purposes based on actual current use, as opposed to fair market value of the property if it was sold for development purposes.

-decendent must be a us citizen or resident
-property must pass to a qualifying heir

70
Q

Tips taxation

A

-subject to federal taxation when received
-the inflation adjustment to principal is also subject to federal taxation in the year the adjustment is made
-the deflation adjustment to principal is also subject to federal taxation in the year the adjustment is made

71
Q

Independent Contractors in Qualified Plans

A

May participate in his own qualified plan but may not participate in another employers qualified plan unless he is deemed to be a regular or common law employee of the plan

72
Q

When do QDROs become valid

A

When the plan administrator has approved the QDRO that has been entered with the court and signed by the judge.

73
Q

SEP part time requirements

A

3 out of 5 years, 750 hours.

74
Q

Non qualified annuity

A

Investment grows tax free

75
Q

Classification of a LI Policiies value for transfer purposes

A

As the interpolated terminal reserve plus the unearned premium

76
Q

Widows right to elect against the will

A

Allows the surviving marital spouse to choose whether to take half the property outright or take the benefits provided under the decedent’s will

77
Q

QDT order of operation

A

Give the exemption amount to non US spouse first and then put the rest in a QDT.

78
Q

Max Contribtuion amount to an ABLE

A

Pegged to the amount of the annual gift tax exclusion

79
Q

How many securities is considered a diversified portfolio?

A

10-15 securities or more is generally considered diversified

80
Q

Advantage of Buying Preferred Stock

A

-c corp dividend deduction
-warrants can be attached adding long term value to the preferred stock

81
Q

CLUT Annual Distribution Percentage

A

Can be any percentage including skipping the distribution entirely.

82
Q

Capatialized with improvements

A

Increases basis

83
Q

Straddle

A

Needs volatility to be profitable

84
Q

ISO Tax Deduction

A

If the stock that was acquired under the option is sold before the two year/one year holding, the excess FMV of the shares at the time of exercise over the exercise price is treated as compensation and also a deduction to the corporation

85
Q

Reverse QTIP Election

A

Under the election, although a marital deduction is claimed for a QTIP trust, the estate can treat the trust solely for GSTT purposes, as if it were still part of the decendents taxable estate. The GSTT exemption is not lost if this is elected

86
Q

AMT Payable on ISOs

A

Increases basis

87
Q

Medicare Special Enrollment Period

A

8 month period that begins following the last month your group health coverage ends or following the month employment ends

88
Q

NOI Calculation

A

Does not include mortgage expenses

89
Q

Risk Capacity

A

Clients overall wealth to their investable assets

90
Q

Yield on a zero coupon

A
91
Q

Appraisal of Charitable gifts

A

Gifts of non cash property of more than 5,000 require an appraisal

92
Q

Preferred Stock Instrisic value

A
93
Q

Sunk cost fallacy

A

When a person is relecutant to abondon a strategy or course of action because their invested so heavily in it

94
Q

Fiscal Policy

A

Congress acts not treasury

95
Q

Rental Loss Passive Activity

A

When rental property is disposed off, current year loss and passive loss carry forward is deductible. AGI does not apply when loss is sold

96
Q

Mid Quarter Convention MACRS

A

Applies is more than 40% if the property is placed in service by a taxpayer during the last quarter of the tax year

CFP Wrong Answer (9 decks)

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