Wrong answer Final Testz Flashcards
Excess Alimony
Under the IRC, the excess alimony payment for the second year is the amount that exceeds the third year by more than $15,0000.
Joint and Last Survivor Table
Only available for husband and wife, generally more favorable than the new uniform life expectancy table with non spouses.
Rental Apartment Building Tax
Enables depreciation deduction to offset rental income on an asset than can appreciate in value. Can be classified as tax deferred
US Savings Bonds tax Treatment
If parents purchase the bonds in the name of their kids, then their AGI would factor into determining the tax treatment at redemption.
FLP Gifting
Transfers limited partner interests to family members, can also help qualify for lack of marketability and lack of control discounts.
MEC distributions
Cash value - basis = amount that is subject to ordinary income
Real Estate Sale Tax Rate
25% tax rate attributable to deprivation recapture
Recapitalization Gift Tax
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.
Put feature on a bond
Matters if an investor thinks interest rates will decline
Credit vs Deduction
Credit is more valuable to a low bracket taxpayer than a deduction would be
Coverdell and 529 Aggregate Contributions
Not affected by one or another
Order of Events for a complaint
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
Corporate AMT
Repealed in the TCJA
NOLs
Only 50% of current tax year income can be offset with an NOL carry forward. With the remainder continuing to carry forward
Ineligible for 1031 like kind exchange
Equipment, intangibles and personal property are ineligible
QBI deduction
20% of income, below the line deduction, phased out for service companies, c corps not eligible
CFP Ethics CE
Two hours every two years
Retirement Savers Contribtution Credit
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
What is funded under a VEBA?
Death Benefits, Medical Benefits and Unemployment Benefits
Who experiences a step up in baris in a buy sell transaction?
Both the estate of the insured and the surviving owner.
Lifetime Learning and AOTC phaseout
145k-175k
Cobra effects from divorce
Ex spouse is covered for 36 months, children stay on group plan.
Best insurance strategy when a business closes
Sell the cross purchase or entity purchase to the insured to not trigger transfer for value
Who pays GSTT in a taxable termination?
The trustee pays any GSTT owed on a transfer to a skip person.
Stock Bonus Plans
Can be integrated with social security, esops cannot
Insured S Corp Disability Benefits
Always receive tax free disability benefits
Section 404a limit on deductible contributions relative to controlled groups
25% of salary between two control plans
Annuity payments tax rate if it exceeds the term
100% are taxable
Death benefits paid by an employer
Incredible in gross income
Calculating basis for a sale of property to charity for a discount
(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.
Disclosure of gifts from referrals
In cash referrals must be disclosed but minimal gifts like fruit or candy may not be disclosed
NPV
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
MEC Income First Dividend Distributions
Cash dividends and dividends used to pay off policy loans are considered income first distributions
SEC Registered Investment Advisors Annual AVD Update
Within 90 days following the close of their fiscal year. Smaller advisors will comply with state specific deadlines
FICA and FUTA
Qualified and non qualified plans are subject, section 125 is not
Transfer for value exceptions
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
K-1 Income from an SCorp
A distribution of profits and thus is treated as investment income. Even if the participant is active
Calculating weighted beta
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
Martial Deduction Qualifications
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.
Recapture on substantially equal payments after 59
10% penalty only applies to payments made before 59 1/2
Replacement value of home
Look for FMV. Reduced by land value if given in answer.
Corporate earnings generally do not include
Profitability projections
Prepaid tuition plans
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
Disability Benefits under salary continuation plan
This is a group plan. The benefits would be taxable as income to to the participant
H0-15 endorsement
Provides increased limits on property and higher sub limits on on jewelry and furs.
Forms of Discipline for CFP Board
Private censure
Public letter of admonition
Suspension
Revocation
life Insurance trust grantor rules
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
Disclaimer Trusts
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
HSAs used for LTC
Can be used to pay for qualified LTC premiums that are age based
Red Herring
A red herring omits the selling price and size of the issue, it is in on the front page of the prospectus
Red Herring
A red herring omits the selling price and size of the issue, it is in on the front page of the prospectus
SEPR
-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
Medicare and HSA
Only when enrolled in Medicare does an individual become ineligible for HSA, not when eligible for Medicare
Tax Deduxtion for work of art created by a taxpayer
Limited to basis which would be the cost of making the artwork
Items that can be depreciated rather than expensed in a rental property
Generally equipment or new features to the property
Section 1244 qualifications
For MFJ, must be a business under 1 million in start up, and allows for a 100k write off first year against ordinary income
Life settlement keys
Look for capital gains answer
Income is characterized as ordinary income to the extent the cash value exceeds the premium paid.
Purposes of immunizing a bond portfolio
-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
FSA Keys
May receive contributions from an eligible person
-contributions are not subject to FICA
-Allowed contributions are not included in income
Self Employed Mandorty Filing Requirment
Must file a schedule SE if net earnings are $400 or more.
MSA Keys
-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.
Section 179 election
An election to expense the cost of certain assets
-available for tangible personal property
Difference between QTIP and Bypass trust
QTIP gives spouse right to all income, bypass gives spouse right to HEMS income
Qualifying Widow tests
Must meet one of the criteria:
-maintains the home
-has a dependent child
-filed a joint return prior year
-did not remarry
APL
Automatic premium loan, the provision will pay the premium if it remains unpaid beyond the grace period.
Actual cash value (insurance)
Replacement value (even when there is an increase) minus depreciation
FSA Plans and LTC
Can’t use FSA funds for LTC premiums
QDRO Applies to
QDROs may not only apply to 401ks but also child support and alimony
Section 2032 keys
-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
Tips taxation
-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
Independent Contractors in Qualified Plans
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
When do QDROs become valid
When the plan administrator has approved the QDRO that has been entered with the court and signed by the judge.
SEP part time requirements
3 out of 5 years, 750 hours.
Non qualified annuity
Investment grows tax free
Classification of a LI Policiies value for transfer purposes
As the interpolated terminal reserve plus the unearned premium
Widows right to elect against the will
Allows the surviving marital spouse to choose whether to take half the property outright or take the benefits provided under the decedent’s will
QDT order of operation
Give the exemption amount to non US spouse first and then put the rest in a QDT.
Max Contribtuion amount to an ABLE
Pegged to the amount of the annual gift tax exclusion
How many securities is considered a diversified portfolio?
10-15 securities or more is generally considered diversified
Advantage of Buying Preferred Stock
-c corp dividend deduction
-warrants can be attached adding long term value to the preferred stock
CLUT Annual Distribution Percentage
Can be any percentage including skipping the distribution entirely.
Capatialized with improvements
Increases basis
Straddle
Needs volatility to be profitable
ISO Tax Deduction
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
Reverse QTIP Election
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
AMT Payable on ISOs
Increases basis
Medicare Special Enrollment Period
8 month period that begins following the last month your group health coverage ends or following the month employment ends
NOI Calculation
Does not include mortgage expenses
Risk Capacity
Clients overall wealth to their investable assets
Yield on a zero coupon
Appraisal of Charitable gifts
Gifts of non cash property of more than 5,000 require an appraisal
Preferred Stock Instrisic value
Sunk cost fallacy
When a person is relecutant to abondon a strategy or course of action because their invested so heavily in it
Fiscal Policy
Congress acts not treasury
Rental Loss Passive Activity
When rental property is disposed off, current year loss and passive loss carry forward is deductible. AGI does not apply when loss is sold
Mid Quarter Convention MACRS
Applies is more than 40% if the property is placed in service by a taxpayer during the last quarter of the tax year
