Unit 4: Session 1: Type of Client
Among the differences between C corporations and S corporations is - the liability assumed by the shareholders - the number of allowable shareholders - the tax treatment of the corporation's earnings - residency requirements of shareholders
2, 3, 4
Which of the following account designations will avoid probate? A)POD B)Margin C)DVP D)Individual
A
In order to pool their money for securities trading, two married sisters wish to open a single account with your firm. Which of the following would you recommend? A)A partnership account. B)A joint tenants with right of survivorship (JTWROS) account. C)A tenants-in-common account. D)Commingling is illegal.
C
Which of the following statements regarding an S corporation owner and an owner of an LLC are true? - Creditors have very limited recourse rights to the owners. - They may not be nonresident aliens. - They both are considered stockholders. - Both receive the tax benefit of owning flow-through entities.
1 & 4
Many investors use trusts to avoid probate. However, not all trusts are designed to do so. Those that would avoid probate include - irrevocable trusts - revocable trusts - living trusts - testamentary trusts
1, 2, 3
There are many sources of taxable income to an individual. Included might be money received from which of the following? - Sole proprietorship. - Subchapter S corporation. - Investments. - Death benefits.
1, 2, 3
All of the following statements relating to an account registered as tenants in common are true EXCEPT A)upon the death of one of the cotenants, that individual's share of the account passes to the survivor(s) B)each cotenant has an undivided interest in the entire account C)this form of registration is less common for married couples than JTWROS D)cotenants can own unequal percentages of the assets in the account
A
In the banking industry, the term POD refers to an account similar to the TOD designation used by broker-dealers. An old, but sometimes still used term to describe this kind of account is A)Totten trust B)Passbook savings account C)Demand deposit account (DDA) D)Revocable trust
A
One major difference between the customer identification program (CIP) and the new account opening rules of the regulatory bodies is that A)the CIP requires date of birth while the regulators only require proof of legal age B)the CIP only applies to individuals while the rules of the regulators apply to retail and institutional accounts C)the CIP requires a residence address for individuals while the regulatory bodies will accept a PO Box D)the CIP requires a statement of the customer's goals while the regulators only require current financial information
A
The customer identification program (CIP) requires that certain information relating to new customers be obtained. Included in that requirement for individual clients who are citizens of the United States are all of the following EXCEPT A)current employment status B)a physical address C)Social Security number D)date of birth
A
Several entrepreneurs form an S corporation. Under which of the following circumstances will the entrepreneurs risk losing their tax benefits? - 150 new investors buy into the corporation during the year. - 1 new member is a nonresident alien. - 50% of the corporation's income is derived from - passive investments in limited partnerships. The corporation issues several classes of stock.
All 4
A fiduciary, acting in accordance with the UPIA, would choose investments on the basis of all of the following EXCEPT: A)needs for liquidity, regularity of income, and preservation or appreciation of capital. B)transaction costs. C)general economic conditions. D)other resources of the beneficiaries.
B
Samantha Wells, a British citizen temporarily working in the United States, wants to form a business venture with other investors. She is looking for favorable tax treatment of earnings and losses. She also wants to limit the number of investors, but is willing to share control of the enterprise with others to attract them. What business form do you advise to her? A)C Corporation. B)General Partnership. C)S Corporation. D)Limited Partnership.
B - Limited partnerships would not work because the other investors have limited say in how the enterprise is run. C corporations do not provide favorable tax treatment of gains or losses. While an S corporation appears to be the right answer, only U.S. citizens or resident aliens can own one.
Which of the following types of business owners has unlimited liability for the business's debts? A)Limited partner. B)Shareholder of a corporation. C)Owner of a sole proprietorship. D)Member of a limited liability company (LLC).
C
A man is planning to start his own glass sculpturing business. He wants to be able to deduct his anticipated losses for the first two years. He anticipates that the enterprise will borrow money from lenders and is willing to personally guarantee the debt. He also wants to attract other investors but does not want to give up control of the day-to-day business decisions. What business form do you recommend? A)S corporation. B)C corporation. C)General partnership. D)Limited partnership.
D
Your advisory client is an 86-year old woman who is presently in the hospital, unable to communicate due to a severe stroke. For the past 6 years, she has followed the practice of making annual gifts of stock to her children and grandchildren on her birthday. Since her 87th is coming up later this month, her oldest son approaches you and asks you to continue the policy. A)With 6 years of prior history, you know this is what she would want you to do so you go ahead as in previous years. B)You should go to the hospital and see if she can blink her eyes to indicate yes or no. C)Without a proper durable power of attorney being produced, you cannot do anything. D)You may only follow the provisions of her will.
C
In an account opened by two individuals as joint tenants with rights of survivorship, all of the following are true EXCEPT: A)in the event of death, the other party assumes full ownership of the account. B)mail may be directed to the joint owner agreed upon by both parties to the account. C)orders may be entered by either party. D)stock certificates may be delivered in the name of either party.
D
If three individuals have a tenants in common account with your firm and one individual dies, then A)the two survivors continue as co-tenants with the decedent's estate B)the account must be liquidated and the proceeds split evenly between the two survivors and the decedent's estate C)trading is discontinued until the executor names a replacement for the deceased D)the account is converted to joint tenants with rights of survivorship
A
The type of trust created in the grantor's will is a A)limited trust B)living trust C)beneficiary trust D)testamentary trust
D
When a will calls for property to be distributed per stirpes, it means that A)all living descendants of the ancestor receive equal shares in the property remaining after all estate expenses are paid B)the property is divided into as many equal shares as there are surviving children of the designated ancestor, with nothing going to surviving descendants of deceased children C)the property is divided into as many equal shares as there are surviving children and grandchildren of the designated ancestor D)the property is divided into as many equal shares as there are surviving children of the designated ancestor and deceased children who left surviving descendants
D
If 150 investors want to form a corporation to limit their financial liability to the amount of money they invest and do not want to be responsible for any debt that the corporation incurs, they would most likely form a(n): A)proprietorship. B)C corporation. C)general partnership. D)S corporation.
B
During a trip to visit grandchildren, one of your clients suffers a massive heart attack and dies, intestate. Directions for handling the account could only come from the: A)person with a durable power of attorney. B)person named as executor of the estate. C)spouse. D)person appointed as administrator of the estate.
D
