WRONG ANSWERS Flashcards
John and Mary 62 have investments basis of 50%. She has large roth. They are delaying SS income. They want 150k income after tax. Have large qualified plans. What should they do to retire now? (current income 200k).
a.start taking a 200k rmd from qualified plan
b. sell about 100k of investments and take a qual disribution of 80k
c. start taking 150k distributions from roth
d. continue to work
b. the 100k would only have a gain of 50000. which would be taxed at 15%, only 7500 of taxes. Qual plan distrib would be taxed at ordinary income (could get it into lower tax bracket if don’t take too much). roth conntinue to grow tax free
Client walks into your office. Wants to convert her IRA to a roth ira. What is most important factor?
If client is 72 or older, she will need to take RMD prior to converting.
Age
tommy own TT inc. His is approaching 72. He wants to continue to work. He partiicpates in the SEP. you can tell him
- his rbd is april 1st of the year following the year he turns 72
- tt inc can continue to contribute to the plan after 72
- he cant contirbute after 72
- his rbd is later of april 1st following yr of turning 72 or retires
1 and 2
tommy has to take dsitrubs. but tt inc can still contribute. unlike iras
under substantially period pmts 72t the one time election allows participants to switch from which of the following?
a. the annuity or amort method to the rmd method
b. the rmd method to the annuity or amort method
c. the rmd method or annuity method to the ammort method
d. the amort and rmd method to the annuity method
A
the one time election permits a switch to the RMD method
Karl age 55 is going to make millions over next few years. he has two employees young. he is unhealthy and did not want to pay the premium for the life insurnace. he wants to fund the max to a retirement plan, benefit his wife and have liability protection.
A. Instal a DB plan
B. Instal a 412(e)3 plan [or 412(i)] plan
C. install a target benefit plan
B.
he could do a fully funded whole life db plan. the plan can use the actuarial assumptions of the whole life contracts. the assum,ptions are normally lower than the plan assumptions (more contributions). The insurance premium will be paid by the plan. If at karls death, the difference between the cash surrender value and the face amount is treated as death proceed of life insurance, and is generally exclused from income tax, but only if the insurance cost under table 2001 (standard rate) has been paid with nondeductible contributions or has been taxable to the employee.
Which is not true of top heavy plans
a. it is one that provides more than 60% of the aggregate accrued bens or acct balances to key employees
b. for defined contributions plans, employer contribus during a top heavy year must be at least 3% of compensation
c. if a DB plan is top heavy for a given year it must provide more rapid vesting sched than generally required
d. if the plan fails to correct its top heavy status for 3 years in a row the DOL can termiante the plan
D. wont be terminated but subject to top heavy rules
Stanley participates in an ESOP funded with both mutual funds and company stock. He is concerned with phantom income when he retires and takes distribs. What should you advise to reduce phantom income?
- take only 72t distribs at retirement
- take a full distrib of acct balance
- take a distrib of company stock
- roll the whole acct into an ira
- roll the mfs into an ira
1 and 4
the ira rollover of the acct which includes employer stock and the 72t eliminate phantom. NUA tax break is lost.
under 401k hardship rules, an employee can request an amount equal to?
- entire balance
- amount equal to elective deferrals
- amount equal to vested profit sharing congributions
- amout equal to earnings
2 and 3
For hardship withdrawals equal to elective deferrals and vest profit sharing contrubtuions
Art just died at 69. His wife is age 60. She has worked for the midwestern railroad company for 35 years and will be elegible for railroad retirement benis of 2k per month. Art had been receiving ss retirement benefits of 800/mth. What is patsy eligible for now?
a. she is elegible for ss widows benefit
b. she is eligible for her own benefit
c. she is elegibile for 255 lump sum db
c
suriving spouse railroad emplyees cannot get ss widows ben and recieve railroad retirement bens.
You have 2 funds in your port 45% is Fund A and 55% is fund B. Their covariance is 0. Fund A has a return of 5.5% and a risk of 9.5%. Fund B has a return of 6% and a risk of 12.5%. What is the SD of the port?
a. .5%
b. 8.09%
c. 7.85%
d. 11.29%
b. 8.09% select the first answer below 11%
which of the following statements about reits is not true
a. reits normally distribute 90% of net investment income
b. reits are listed and trade on stock exchanges
c. reits issue redeemable shares. issuers make a market
d. reits must invest at least 75% of their assets in real estatre related activities to qualifiy for conduit treatment
c. not redeemable
Which of the following statements about investment companies isnt true?
a. closed end funds can trade at a premium or discount to their NAVS
b. UITs can be purchased on one of the national exhcanges
c. open end funds are negotiable securites
d. uits offer a limited number of shares when issued
A. Uits issue units not shares
Rita elects a salary reduction of 2850 to her medical expenses fsa account. Which of the following statements is true if the plan has a grace period?
a. the salary reduction is subject to fica and futa
b. if rita fails to use all of the salary redcution 2850 by year end the remaining dollars are forfeited
c. the medical expense portion is limited to 2850
c. there is an extra 2.5 months to spend the money for medical expenses. the plan has a grace period provision. the med expense is limited to 2850 in 2022
Best inc has 5 employees. the company is considering installing a group disability plan. What would be the most important advantage for using a group plan over indiidual plans.
a. simpler underwriting
b. lower cost
c. better benefits
d. tax free bens
b. if emploer is paying premium, cost is the most important factor.
Phillip was vp of sales with glamour inc. Glamour owned an endorsement method split dollar policy on his life. He decidied to buy the policy from glamour and transfer it to a new company that he was starting with two other people (33% each). If Phil dies, will the DB be included in his estate?
a. no this is what transfer for value avoids
b. no dan gifted the policy to the new corp (not a sale)
c. yes if he dies within 3 years of the transfer
d. no it will only be included if he changed the beneficiary
c. at the time of the transfer, phil had incident of ownership (right to name beneficiary). the 3 yr inclusion rule is in effect. Answer A is true but phil buying the policy doesnt trigger a transfer of value
A company owns whole life on key employees. The company is considering borrowing the cash value of the policies for businesses reasons. The company must pay the interest on the loan. Is the interest an eleigible business deduction?
a. no after 1986 life insurance interest ins’t deductible
b. no it is anot a normal business expense
c. yes but it is limited to 50k loan on each policy.
c. a business may deduct a limited amount of interest paid on contracts covering a key person to the extent that each loan doesn’t exceed 50k.
Ted and Hallie have been your clients for a long time. They recently told you that they are getting sick and need to move into an assisted living facility. They have about 500k in their investment account. Most came from selling their homes. Their SS pmts total about 1500/mth, started taking at 62. What do you recommend?
a. Determine how much the assisted living facility will cost
b. see an elder care attorney
c. execute a living will
d. name a family member who can handle their financial affairs
e. reposition their account for more liquidity and income
B. they need expert legal advice before making decisions about living and other matters
A CFP professional sells a 73 yr old lady a million dollar annuity. He closed out all her investments. It has a 9 yr surrender with high commish. The professional knew she had a daughter she lived with and the clients only expenses were covered by social secuirty.
The professional told the client it would simplify her investment decision. What did the CFP pro violate?
A. Integrity
B. Disclose of conflicts of interest
C. Professionalism
D. Duty of Care
E. All of the above
E. All are part of standards of conduct
New clients walk into your office. They have a baby. They have done no planning. They have limited assets and have debt. They are confused and need help. What should they do first?
a. buy med insurance
b. buy a lot of term life insurance
c. establish a 6 month emergency fund
d. consult an atttorney to establish guardianship
A. Addresses the most immediate concern. ntohing says they are not married
Tommy is meeting with a new client. What is first step he should take?
A) give client his firm brochure
B) provide client with written disclosure of all material info
C) ask the client for a written agreement as to his/her understanding of the financial planning process
D). Review the clients goals and objectives
B) provide client with written disclosure of all material info
You have calced that Npv is 0. Using interest rate of 12%. Pp is 100k of the investment. Which is true?
A. Irr is 12%
B. Irr is less than 12
C. No solition
D. Irr is more than 12
A. Irr is 12
Npv is zero interest rate is the same as the required rate
Cfp practicionar is unable to obtain sufficient and relevant quantivitave info and documentstion to form a basis for recs, the prsfticionar shall
I. Restrict scope for those matters with sufficient info
Ii. Terminate engsgement
I, ii, both
Both
New client disclosed most of data you need to write a financial plan. Does not provide complete tax info. He gave you cpa number. Can cfp call his cpa without permission?
A) yes he gave you authorixation to make a plan
B. Yes its presumed
C. No you violated duty of confidentiality and privacy
D. No it does not matter cpa wont give info anyways
C. No you violated duty of confidentiality and privacy
Paula stone spent nearly 2 yrs on education and 1 year to pass the exam finally. Upon submitting app, cfp suspended her for 2 yrs. Will this be published?
Yes
No
Yes, automatically published
