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Income Tax Planning Topics
Terms in this set (63)
Investment interest expense is deductible if
the investor itemizes
What is the investment interest expense maximum you can deduct?
Net taxable investment income
Is credit card interest deductible?
No it is personal interest
Are investment advisor or accounting costs deductible?
What rate are collectibles taxed at over the long-term?
Long term capital gains and qualified dividends are not considered investment income unless the taxpayer
elects to have them taxed at ordinary rates
Tax deduction on donating appreciated stock is ___________% of a taxpayers AGI and can be carried forward _______ years if reduced deduction election is not made.
If reduced deduction for long-term property donated to a charity is chosen, then the deduction is limited to ______________
Fair market value
What portion of unreimbursed personal casualty loss can be deducted in a federally declared disaster?
adjusted basis or reduction in fair market value as a result of the casualty - $100, to the extent it exceeds 10% of AGI
When a wash sale occurs the basis in the remaining shares, plus ___________ is the new basis
Previously disallowed losses
When a taxpayer donates use unrelated tangible personal property to a charity, their deduction is the lesser of
taxpayer cost basis or FMV at the time of the donation
Sale of a personal residence is tax free up to $500k, but any depreciation taken
will be recaptured at the 25% depreciation recapture rate
Estimated tax payments need to be lesser of ________% of current year liability or ________% of prior years liability if AGI under 100k, If AGI is higher than 150k, the rule changes to _________% of current years and _______% of previous years liability
90 100 90 110
Are compensatory damages relation to a physical injury taxable
Which of these is included in FAFSA estimated contributions: Family home, retirement plan, vehicles, family owned business less than 100 employees, non qualified mutual fund account, motor vehicles, furniture
mutual fund account
A gift can be lumped sum into a 529 plan and ratably distributed over ______________ years of tax returns
What is the amount of the american opportunity tax credit?
100% of the first $2,000 of qualified expenses plus 25% of the expenses in excess of $2,000, limited to $2,500 / student
A CFP must act as a fiduciary when
Acting with care, skill, prudence, and diligence that a prudent professional would exercise in light of clients goals risk toleracne objectives and financial and personal circumstances
Duty of Care
Providing professional services, including responding to reasonable client inquiries in a timely and thorough manner
Duty of Diligence
How long does a CFP professional have from a bankruptcy of IRS issues to the CFP board?
A CFP must help a client _______ goals and help the client _________ and ____________ those goals
identify select prioritize
When do you deliver form ADV?
First step establishing client relationship
What is the best debt to pay off first
Federal policy is restrictive when it ___________ expenditiures and debts
When should unrealistic goals be addressed in the planning process?
Identifying and selecting goals phase
What does medicare do for a employee in an employer health plan with more than 20 employees who is 65 years old and still working
it provides secondary coverage
Employees option to purchase additional coverage on their lives through a group insurance plan is known as
supplemental life insurance
What does Medicare Skilled Care coverage cover?
following a minimum three day hospital stay it covers full cost of first 20 days and the amount in excess of daily deductible days 21-100
actual insured amount / coinsurance requirement =
percentages covered by insurance
What is more important for a high net worth client? A life insurance policy on a non-income earning spouse or an umbrella policy?
A ____________ is useful when one parent dies shortly before the other, because the first parents estate will pass to the children after the first death (avoids probate the second time)
Should a CFP process a request on a joint account when only one listed person on the account asks for it?
Terminally ill, high net worth clients should enter into a ___________ ___________ with their children because they will not get the full value if they die before life expectancy, but the children will acquire the property being passed at a discounted price
Can parents make a gift of $60,000 to a child and their spouse using gift splitting?
Yes (15,000k * 2 for each spouse)
Taking advantage of a volatile or declining market and encouraging disciplined investing are both advatages of
dollar cost averaging
What does immunization do?
it balances price risk and reinvestment risk (offers protection against interest rate changes)
The amount of a clients debit in a margined portfolio =
Portfolio value * (1-equity%)
__________ Is a measure of the bond as it relates to interest rates, lower coupon rates skew cash flows toward the maturity date which increases the __________
What is the difference between arbitrage pricing theory and CAPM
CAPM is single factor while APT is multi factor
What happens to employer contributions to Non- key employees if a plan is top heavy?
everyone gets 3%
When do surviving spouse child care benefits run out? Unless the child is _________
What is form 709?
gift tax return
Passive activity Rules can deduct $_______k in passive losses against ordinary income if AGI is less than $ __________k, phased out up to $__________k
25 100 150
What is a phantom stock plan?
A plan that credits employee accounts with units that mirror stock value
What is the imputed interest on loans less than $10,000?
An employee is an HCE if they make $________k a year, or they are a ________% owner at any point during the year, unless a top 20% election is chosen, then income can be able the limit
A top heavy DB plan must provide _____% for each service year to non key employees
A Key employee is an officer with comp >$_________k , greater than ______% owner, or owns ________% with >_______k comp
185 5 1 150
Net income * 15.3% is the self employment tax, self employement tax times _____% is deductible self employement comp
When must a seller recognize depreciation recapture?
Year of sale
An exception to passive loss limits regarding real estate allows individuals to deduct up to $_______k in losses from real esttate activities against active and portfolio income. However the annual $_______k deduction is reduced by _______% of taxpayers AGI in excess of $________k
25 25 50
Capital loss deductions are limited to $__________k of ordinary income and _________ _________
3 capital gains
What is the 1231 Property deduction limit
Unlimited against ordinary income
What is a 1231 Property
A real or depreciable property used in a trade or business and held for 1 year at least
How are gains and losses treated on 1231 Property (real or depreciable property used in a trade or business held over one year)
gains long term capital, losses ordinary
Medical expenses are deductible only
to the extent they exceed 7.5% agi
For loans over 10k, but under 100k, imputed interest is the federal rate - the actual rate limited to
Borrowers net investment income
A C Corp with over $25m in gross receipts cannot use which accounting method
Sales price less commisions paid on the sale
Dividends are taxable to the recipients of dividend income, but only
to the extent of corporations current and accumulated earnings
What are dividend and interest income considered?
How much of paid self employement tax can be deducted by a self employed person
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