Series 65: Unit 16 Exam

When opening an account for a trust, which of the following sets of terms are synonymous? A. Trustee/settlor B. Settlor/grantor C. Grantor/trustee D. Beneficiary/trustee

Settlor/grantor

An individual opens an account with your firm. She tells you that upon her death, she wants any assets in the account to be divided equally among her three children. She also wants the ability to change the allocation in the event that conditions change and one of the children is in greater need than the others, but she does not want to incur any significant legal expense. You would suggest that the account be opened A. as a joint account with right of survivorship. B. as an individual TOD account. C. as a joint account with tenants in common. D. under a discretionary power.

As an individual TOD account

A Schedule K-1 would not be used for tax reporting to the owners by which of the following business entities? A. Limited partnership B. Sole proprietorship C. S corporation D. LLC

Sole proprietorship

An investment adviser could enter into an advisory contract with any of the following except A. an LLC. B. a political subdivision. C. a person declared mentally incompetent. D. the custodian for a minor.

A person declared mentally incompetent

Agatha has an account with her Aunt Sally, which is registered as TIC. If Sally predeceases Agatha, the assets in the account go to A. the person designated under the laws of escheat in her state. B. Agatha. C. Sally's spouse. D. Sally's estate.

Sally's estate

A married couple wishes to open an account at your firm. Which choice of registration would you recommend if they insist that no trading be done without the consent of both of them? A. Tenants by the entirety B. Tenants with right of survivorship C. Tenants in common D. Joint tenancy

Tenants by the entirety

The benefits of structuring a business as a general partnership include A. the ability to raise large sums of money. B. avoidance of taxation at the entity level so the partners are not taxed twice. C. the general partners being liable only to the extent of their investments. D. longevity.

Avoidance of taxation at the entity level so the partners aren't taxed twice

J.B. Rich founded Rich, Inc., and he owns a substantial block of stock with a very low cost basis. Which of the following statements are true regarding the disposition of J.B.'s stock? 1. If it is given away, the recipient of the gift assumes J.B.'s cost basis. 2. If it is given away, the recipient of the gift receives a stepped-up basis to the market value as of the date of the gift. 3. If it is inherited, the beneficiary assumes J.B.'s cost basis. 4. If it is inherited, the beneficiary receives a stepped-up basis to the market value as of the date of J.B.'s death.

If it is given away, the recipient of the gift assumes J.B.'s cost basis and if it is inherited, the beneficiary receives a stepped-up basis to the market value as of the date of J.B.'s death

When are estate taxes due? A. Six months after death B. Nine months after valuation C. Six months after valuation D. Nine months after death

9 months after death

Keisha has three married children, each with children of their own. She wishes to leave equal shares of her estate to each of her children. What happens if one of those children dies before Keisha? A. The estate is divided equally among the two surviving children and the children of the deceased child. B. The share belonging to the deceased child is distributed per stirpes. C. The estate is divided equally among the two surviving children. D. The estate is divided on a per capita basis.

The share belonging to the deceased child is distributed per stirpes

The president of a business entity opens an account in the name of the business. When determining the suitability of recommendations to the account, knowing the president's personal financial condition is necessary for each of the following forms of business structure except A. a C corporation. B. an LLC. C. a sole proprietorship. D. an S corporation.

A C corporation

Your client recently sold his business for $5 million. He is 55 and feels that he is too young to retire. He plans to start a new business venture and will be funding the $250,000 start-up costs with his own funds. With substantial personal assets, he could limit his personal exposure by using any of the following business structures except A. a C corporation. B. an S corporation. C. a limited liability company. D. a sole proprietorship.

A sole proprietorship

When comparing the tax treatment of C corporations, S corporations, and LLCs, it would be correct to state that A. registered personnel opening a brokerage account for any of these would follow similar suitability procedures. B. only the C and S corporations offer the benefit of flow-through. C. all three have the same tax filing date. D. the C corporation is the only one that pays taxes.

The C corporation is the only one that pays taxes

If a trust has been established under which the father is to receive income for life and his son is to receive the trust principal on the father's death, which of the following statements is true? A. The trustee must notify the son each time an income distribution is made to the father. B. The trustee can withhold income distributions to the father to preserve principal to the son. C. The trustee does not need to keep records of the income distributions to the father. D. The trustee is not required to notify the son when an income distribution is made to the father.

The trustee isn't required to notify the son when an income distribution is made to the father

Gloria wishes to set up a trust where income must be annually distributed to her daughter. Gloria wants her daughter to pay any income taxes because her daughter is in a lower tax bracket. What should Gloria do? A. Use a simple trust with her daughter as irrevocable beneficiary B. Use a complex trust with her daughter as irrevocable beneficiary C. Use a simple trust with her daughter as revocable beneficiary D. Use a complex trust with her daughter as revocable beneficiary

Use a simple trust w/ her daughter as irrevocable beneficiary

Which of the following statements regarding estates are correct? 1. Estate taxes are due on April 15 of the first year following the death of the deceased. 2. Estate taxes are due nine months after the date of death of the deceased. 3. Assets are valued based on their market value as of the date of death or, alternatively, six months later. 4. Assets are valued based on their cost or, alternatively, six months after the date of death.

Estate taxes are due 9 months after the date of death of the deceased and assets are valued based on their market value as of the date of death or, alternatively, 6 months later

One of your customers purchased a variable life insurance contract through your firm. After 14 years, he had deposited $15,000 in premiums, and his death benefit had grown to $80,000. Shortly after taking out a loan against cash value of $10,000, he was killed in an automobile accident. What will be the tax consequences of this situation to the death benefit? A. His beneficiary must pay taxes on the amount of the death benefit that is over and above the cost base of $15,000 plus the unpaid loan. B. His beneficiary need not pay taxes on the death benefit. C. His beneficiary must pay taxes on the amount of the death benefit that is over and above the cost base of $15,000. D. The first $15,000 is tax free with the excess being treated as a long-term capital gain.

His beneficiary need not pay taxes on the death benefit

A deceased individual with two surviving children and a spouse had established a trust for his family. The trust document appointed both children as cotrustees. The surviving spouse is to receive current income, and his two children will receive equal shares of the remaining principal upon the spouse's death. As the adviser to the account, you A. focus on increasing principal for the children. B. focus on generating income for the spouse. C. attempt to generate reasonable income while keeping the principal intact for the children. D. follow the instructions of the trustees.

Follow the instructions of the trustees

Which of the following statements about S corporations is not correct? A. S corporation status offers greater opportunity for raising additional capital than do other forms of business structure. B. An S corporation may have only one class of stock. C. Stockholders of S corporations are taxed on the net profits of the corporation even if they do not receive taxable dividends. D. An S corporation may have no more than 100 shareholders.

S corporation status offers greater opportunity for raising additional capital than do other forms of business structure