Unit 21
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?
His beneficiary need not pay taxes on the death benefit.
An investor purchases 100 shares of ABCE common stock at $70 per share. Thirteen months later, the stock is sold when the market price is $50 per share. Which of the following activities made 20 days after the sale of the stock at $50 per share, would NOT violate the wash sale rule?
Purchasing an ABCE put option
A Schedule K-1 would NOT be used for tax reporting to the owners by which of the following business entities?
Sole proprietorship
A number of corporations offer dividend reinvestment plans (DRIPs) where the client's dividends are automatically reinvested in additional shares of the issuer. In the case of a company that pays dividends with some degree of regularity, if the market price per share has declined over the year, an investor participating in one of these plans would find which of the following to be TRUE (assume no splits)?
There are more shares in the investor's account.
Each of the following could cause an investor to be subject to the alternative minimum tax EXCEPT
interest received on school district GO bonds
An investor has made the following purchases, all in the same calendar year: 100 ABC at $20 on January 15; 200 ABC at $25 on April 4; and 100 ABC at $30 on July 23. With ABC currently selling at $22, if this investor needed to sell 200 ABC, the best decision from a tax standpoint would probably be to
use LIFO
When are estate taxes due?
9 months after death
Benefits of structuring a business as a general partnership would include
avoidance of taxation at the entity level so the partners are not taxed twice
When comparing the tax treatment of C corporations, S corporations, and LLCs, it would be CORRECT to state that
the C corporation is the only one that pays taxes
Using industry jargon, the tax on the last dollar of income is at
the marginal rate
An estate planning tool that may be used to take advantage of the lifetime estate tax exclusion is the
bypass trust
The amount of federal income tax a U.S. citizen residing in the country will pay is dependent on all of these EXCEPT
gender
Many different investments offer the opportunity to reinvest income. If one were to compare the difference between interest-on-interest reinvestment plans and dividend and capital gain reinvestment plans,
in both plans, all income is taxable in the year received, whether reinvested or not
The alternative minimum tax becomes a consideration when a taxpayer has so-called tax preference items. Included in that definition is
interest from private activity bonds
An example of an interest-on-interest reinvestment program is
interest left to compound on a bank-insured certificate of deposit
Part of the information-gathering role of an investment adviser representative is preparing a family balance sheet and family income statement, both of which are essential for determining suitability. Which of the following would be entries on the income statement rather than the balance sheet?
Alimony
If an investor is in the highest federal income tax bracket and is subject to the alternative minimum tax, which of the following securities should an agent recommend?
General obligation bond
You are working with a client who received her divorce earlier this year. She has 2 young children, ages 4 and 7, who both live with her. In general, it would be most advantageous for her to file her federal income tax claiming what status?
Head of Household
