Domain II - CPWA

SECTION __________depreciable and real property used in trade or business and held for more than one year are allowed cap gains treatment of gains and ordinary income treatment of losses

1231

SECTION __________certain small company stock allowed cap gains treatment and ordinary income treatment for losses

1244

SECTION __________re-characterization of cap gains as ordinary income to recapture accelerated depreciation on certain real property

1250

A more helpful metric for measuring after-tax efficiency for separate accounts is the: A. relative wealth measure. B. Morningstar tax-cost ratio. C. capital gains realization rate. D. portfolio turnover rate.

A

A partner's contribution of property to the partnership in exchange for a capital interest in the partnership: A. represents the partner's ownership rights in the partnership upon his withdrawal from the partnership or upon liquidation of the partnership. B. results in a recognized gain or loss by the partnership at the time of contribution. C. results in a recognized gain or loss by the contributing partner at the time of contribution. D. represents the partnership's realized but unrecognized gain or loss from this transfer of property.

A

Grantor trusts, both foreign and domestic, may provide asset protection for the trust's grantor. The following are potential benefits of a grantor trust except: A. tax-favored treatment of trust income B. control and flexibility C. protection of pre-marital assets D. option to include spendthrift provisions in the trust document

A

Irrevocable trusts do not allow the settlor to revoke or modify the trust after the settlor establishes the trust. Irrevocable trusts are very effective asset protection tools. By giving the settlor a ____________________ over the trust corpus, only in favor of the objects of the settlor's bounty (e.g., the settlor's spouse or children), the trust instrument prohibits the trustee from using trust assets to discharge any of the settlor's legal obligations to support beneficiaries who are the objects of her bounty. This plan protects the settlor from creditor claims based on the argument that she is an indirect beneficiary of the trust and thus can reach funds for the support and maintenance of her beneficiaries. A. special power of appointment B. general power of appointment C. non-discretionary power D. reversionary right

A

Sammy had $1,100,000 in net profit from his small manufacturing company (established as an LLC). He has $70,000 in muni-bond interest, $30,000 in interest income, and $120,000 in non-qualified dividends. Sammy paid $20,000 in qualified mortgage interest and paid $15,000 in deductible health insurance premiums for his family. Sammy paid $54,000 in self-employment taxes and he paid $40,000 for property taxes on his primary residence. He paid $32,000 in property taxes on his primary residence and contributed $54,000 to his SEP-IRA through the LLC. Calculate Sammy's AGI (adjusted gross income). A. $1,154,000 B. $1,224,000 C. $1,035,000 D. $1,127,000

A

The _________________ works well in ______________________. A. consultant capture ratio / upward-sloping smooth markets B. relative wealth measure / upward-sloping smooth markets C. relative wealth measure / choppy or downward-sloping markets D. consultant capture ratio / choppy or downward-sloping markets

A

The capital-gains realization rate formula is best represented by the following equation: __________________ divided by the total gain in the fund. A. capital gains distribution B. long-term capital gains C. short-term capital gains D. capital gains realized

A

Richie and Heather are married, have no children, and file a joint return for 2022 with taxable income of $1,635,000. They have alternative minimum tax preferences and adjustments of $78,000 in applicable non-itemized deductions. They claim $640,000 in qualified charitable deductions and paid $112,000 for state and local taxes. Their regular tax liability is $465,000. Perform the AMT tax liability calculation and determine their total tax liability from the options below: A. $457,800 B. $478,318 C. $686,444 D. $465,000

B

This measure of tax-efficiency is helpful in the weighing of short-term capital gains realized compared to all capital gains realized; and, therefore, it is a fund manager's attention (or lack thereof) to tax ramifications that affect his or her trading decisions. This metric is not considered one of the more complete measures of tax-efficiency but can be of help in analyzing tax-awareness of investment managers. A. portfolio turnover rate B. accountant's ratio C. relative wealth measure D. consultant capture ratio

B

All of the following statements regarding taxation of trusts are true except: A. Trust income may be taxed to the trust, the trust beneficiaries, or the grantor of the trust. B. Income generated within irrevocable trusts is taxable to the beneficiaries to the extent the income is distributed to them. C. Income earned within a grantor trust is taxed to the grantor, or settlor of the trust unless the grantor does not receive the income directly. D. Trusts are taxed as separate entities and have their own tax rate schedule.

C

By definition, the ________________ identifies the percentage of the appreciation of an investment that has created a taxable event. A. liquidity ratio B. inflation adjusted real return C. capital gains realization rate D. relative wealth measure

C

In most states, under most circumstances, the ________________ for fraudulent transfer claims is _____________. A. claw-back provision / 5 years B. statute of limitations / 7 years C. statute of limitations / 4 years D. claw-back provision / 10 years

C

This tax-efficiency measurement reveals the percentage of return that is retained by taxable investors and is calculated by dividing the after-tax return by the return before tax. A. accountant's ratio B. capital gains realization rate C. consultant capture ratio D. relative wealth measure

C

Which of the following assets is "often available" but generally "least attractive" in fulfilling the claim of a creditor? A. cash value of a life insurance policy B. jointly held assets between husband and wife C. distributions from a family limited partnership D. equity in a secondary residence

C

Which of the following assets is likely to be least protected from the claims of creditors? A. SEP-IRA B. IRA rollover C. inherited IRA D. Roth IRA

C

Which of the following regarding charitable contribution deductions is accurate as it pertains to gifts of depreciated assets? A. Taxpayer deducts the average of fair market value and cost basis for gifts of depreciated assets. B. Taxpayer deducts the greater of fair market value or cost basis for gifts of depreciated assets. C. Taxpayer deducts the lesser of fair market value or cost basis for gifts of depreciated assets. D. Taxpayer deducts the fair market value for gifts of depreciated assets unless he chooses the specific-tax-lot-identification method.

C

Which of the following structures below offers the grantor: flexibility to make investment decisions, the ability to make distributions for the benefit of the beneficiary and/or other family members, protection from creditors although it varies by state, tax deferral on capital gains, and only a 10% penalty for funds distributed that do not fulfill the original dedicated purpose for the funds? A. revocable grantor trust B. grantor retained annuity trust C. Section 529 Plan D. intentionally defective grantor trust

C

Your client owns all of the assets below and each plays an important role in the asset selection you have chosen. Two assets must be owned through a taxable account while the other two may be held in a tax-deferred IRA account. Assuming no other information, which two assets would be most tax-efficient if held in the IRA account? I. Limited partnership with significant UBT II. Real Estate Investment Trust (REIT) III. Zero-coupon bond IV. Equity index ETF A. III and IV only B. IV and I only C. II and III only D. I and II only

C

The __________________ ratio equals the ratio of short-term capital gains realized to total capital gains realized. *The logic is that if a manager is realizing many STCGs he may not be considering the tax consequences of trading decisions.

accountants

Does relative wealth measure work in all kinds of markets or just upward sloping markets?

all kinds

_________________ occurs when future prices are lower than spot prices. It indicates short supply.

backwardation

____________ gains realization rate is the percentage the manager chose to realize. The formula is: Capital Gain ____________/Gain Stock

capital, Distribution

Which tax efficiency ratio is this? after-tax return / by before-tax return

consultant capture ratio

Which tax efficiency ratio works well in smooth, upward-trending markets?

consultant capture ratio

________________ occurs when future prices are higher than spot prices. It indicates immediate supply.

contango

With relative wealth measure: The _______ the better; zero indicates little tax impact

higher

__________ turnover measures how often assets are ________ or sold (usually within a time period like a year). It is a simple measure of potential taxation, but not usually the best measure of tax efficiency.

portfolio, bought

Self cancelling installment note vs. Private annuity: A __________ always ends on death of annuitant; a __________ can end earlier if principal is completely paid.

private annuity, SCIN

Consultant capture __________ is the percentage of return that the taxable investor retains.

ratio

Relative _________ measure is particularly helpful when analyzing separately managed accounts. It measures the amount per $1,000 of assets that needs to be invested at the pre-tax return to pay the _____ liability.

wealth, tax