UGBA 196 • Final Combined
In terms of annual income, to be in the top 1% of households, annual earnings should exceed about:
$400,000
What is the maximum amount you can contribute to IRA?
$5,500
What's the most you can contribute annually to your IRA? What's the most you can contribute to a spousal account?
$5,500 to yours, and $5,500 to your spouse's
If you have $14,000 of short term capital gains, and $7,500 of short term capital losses in the same year, how much will be taxable to you?
$6,500
What is the maximum tax rate on qualified stock dividends?
- 20% for singles with taxable income > $425,800 - 15% if taxable income < $425,800 - Stock held at least 61 days
What is a prepaid card?
- A form of plastic money not linked to a bank account - Secure way to carry money
A "judgment" as arrived at in a court of law is:
- A statement of how much creditors are owed - Public record - Reflected in your credit report
Shares of a closed end fund may trade:
- Above, at, or below net asset value
What is covered under a homeowner's insurance policy?
- Additional living expenses - Personal belongings - Personal liability
What are the major benefits of the Healthcare Reform Act?
- All US citizens and legal residents must buy health insurance. - Insurers may not cancel a policy because an insured person gets sick. - Insurers are prohibited from denying or excluding coverage to anyone, including children, with pre-existing conditions. - Insurers may not impose annual or lifetime limits on coverage. - Free preventative care - Children up to age 26 on parents' plans - Medicaid expanded - Limits on how much a premium can vary between people with the same plan.
When a new credit card account is opened, there can be no interest rate increase for 12 months unless:
- An introductory rate has expired - You are more than 60 days late with a payment - You are on a variable interest rate tied to an index
Difference between annual interest rate and APR
- Annual interest rate: cost of borrowing the principal loan amount - APR: basically the annual interest rate, plus additional charges or fees
When renting an apartment, it is important to know:
- Are utilities included? - What happens if you move due to employment? - Can you sublet the apartment?
Places that credit card companies don't like you to use your card at:
- Bars - Pawn shops - Tire re-tread shops
Real Estate Investment Trust (REIT) facts:
- Best owned in tax sheltered accounts - Do not pay taxes if they distribute 90% of profits - Shares can trade like stocks in the marketplace
To reduce the cost of homeowner's insurance, consider:
- Bringing the structure up to code - Increasing the deductible amount - Consolidating all your personal insurance with one company - Installing burglar, carbon monoxide, and smoke alarms
What is a proprietorship?
- Business owned by 1 person -- if person dies, business dies - Proprietor has unlimited personal liability - Profits taxed at ordinary individual tax rates, losses can reduce taxable income
What is a corporation?
- Businesses that provide limited liability to owner/shareholders, chartered by the state - File their own tax returns - Survives the death of any shareholder
Identity theft can be done:
- By theft of a wallet or purse - By email or phone - By hacking
Most common error found in credit reports?
- Charges mistakenly reported - SSN in error - Not your report
What is not included in the purchase price of a house?
- Closing costs - Inspection costs - Move-in costs
Earned income includes:
- Commissions - Salaries - Wages
What is PEG rate?
- Compares current price/earnings ratio (P/E) to growth rate of earnings (G) to determine whether the company's anticipated growth rate is being reflected in the current price - 1.0 = attractive buying range bc growth rate is increasing faster than the market is currently valuing the stock
If you're a victim of credit card fraud what do you do?
- Contact the three major credit agencies and put a "fraud alert" on your account - Notify your credit card company right away
Difference between credit reports and credit scores
- Credit report = individual financial report card which tells whether you have been making your credit card and loan payments on time - Credit score = determined by total information about you on your credit report
Debt has what characteristics?
- Debt comes with interest - Debt must be repaid - The state of owing something such as money
What is tax deductible to the owner of rental real estate?
- Depreciation - Maintenance and repair - Insurance
Bonds with a face value of $1,000 selling in the open market could be selling at a:
- Discount - Face value (par) - Premium
When applying for a home loan
- Do not overstate your income - Do not alter your income tax returns - Do not overstate your length of employment
What's the difference between the Dow Jones industrial and the S&P 500?
- Dow Jones = 30 stocks, price-weighted - S&P = 500 stocks, market value-weighted - S&P considered more encompassing bc includes a greater sample of total US stocks
What's the difference between earned income and unearned income and adjustable gross income?
- Earned = wages, salary, bonuses, commissions, royalties, tips, money received for personal services - Unearned = taxable interest, ordinary/qualified dividends, business profits/losses, capital gains or losses on investments, pension receipts, certain tax refunds, SS benefits, unemployment compensation, individual retirement account distributions, real estate activities, partnership income - AGI = subtracting from total income specific deductions
What is the difference between earned income and unearned income?
- Earned income: wages, salary, tips... money received from personal services - Total income: Earned Income + Unearned Income - Unearned income: taxable interest, ordinary and qualified dividends, business profits/losses, capital gains/losses on investments, Social Security benefits, unemployment compensation, partnership income
The three major credit reporting agencies are:
- Equifax - Experian - Transunion
Which of the following is a reason for an IRS audit?
- Failure to sign a tax return - Mathematical errors - Not reporting all taxable income
Interest on corporate bonds is:
- Fixed at the time of issue - Taxed as ordinary income to the bondholder - Tax deductible to the corporation
Medicare Part A
- Free to seniors who enroll - Benefits apply to hospitals and skilled nursing - Paid for by payroll taxes (1.45% each from employee + employer)
Which is not "consideration" when creating a contract?
- Gender
Why invest in real estate?
- Generate income - Speculate on land appreciation - Seek long term tax deferred appreciation
What is a grant or a restricted stock unit?
- Gifts of stock - Restricted means there may be certain conditions like length of service in order to own the stock - Vested means the stock is yours, and you can take it with you even when you leave
According to the current tax code, you can give the following without having to pay a gift tax:
- Give up to $15,000 a year to as many people as you want - Pay student tuition directly to the institution - Pay hospital bills for a student directly to the hospital
What are the different types of interest rates?
- Go-to - Variable - Fixed
Bankruptcies
- Handled in federal court - Will not relieve you of alimony or child support - Will appear on your credit report
Second liens on a piece of property include:
- Home equity lines of credit - Home equity loans - A second mortgage
The cost of leasing a car is based upon:
- How many miles you plan to drive per year - The interest rate on financing the depreciation - The residual value of the car
Yield to maturity?
- How much you will receive in the future if you hold the bond to maturity - Sum of all cash flows from both coupon payments and repayment of the face value
If the credit card issuer notifies you of a significant change in terms, and you do not want to accept them: your options include:
- Increase the monthly payment so the balance will be paid in five years - Double the percentage of your minimum payment - Close the account by paying off the balance
Unearned income includes:
- Interest - Capital gains - Dividends
What items are tax-sheltered in an IRA?
- Interest - Dividends - Capital gains
Which types of income must be reported to the IRS
- Interest - Foreign accounts and trusts - Ordinary dividends
What can corporations deduct for tax purposes?
- Interest paid to holders of corporate bonds - Losses can be used to offset taxes on future profits
What is dollar cost averaging?
- Investing a set amount of money in shares of stock on a regular time schedule, regardless of the price of the shares at the time - Mathematically, doing this means you will more shares at lower prices than at higher prices
Which of the following is a good use of debt?
- Investing in a well thought out business - An affordable home loan - An affordable car loan
A first mortgage
- Is secured by a piece of property - Is a legal loan document - Has first claim on the property
Depreciation in real estate results in the following:
- It creates a non-cash expense for tax purposes - It decreases the cost basis - It reflects a loss of value
The biggest financial challenges facing future generations:
- Large numbers of under-educated and unemployed workers to be supported - Huge federal debts to be repaid - More elderly to be supported by fewer workers
Budgeting or putting together a spending plan enables the following:
- Lets you manage your money - Helps you to live within you means - Starts the process of financial planning
What is a limit order to buy and sell?
- Limit order to buy = you set the highest price you are willing to buy - Limit order to sell = you set the lowest price you are willing to sell
What is eligible for a 20% pass-through tax deduction?
- Limited liability corp. (LLC) - Partnership - Proprietorship
Exchange Traded Funds ("ETF") provide:
- Liquidity - Diversification - Dividends
Which of the following are prepaid card fees?
- Load money onto the card fee - Monthly maintenance fee - Activation fee
Refinancing a mortgage may be done to:
- Lower interest rates - Consolidate first and second mortgages - Lower the monthly payment
Why do some homeowners refinance their home loans?
- Lower monthly payments - Lower interest rates - Change term of the loan - Consolidate first and second mortgage
What is a market order to buy and sell?
- Market order to sell = sell now = sell at bid price - Market order to buy = buy now = sell at ask price
Stock options:
- May be in the money - May be given to employees for free - May be out of the money - May be subject to payroll taxes - May be worthless - May be subject to short term capital gains taxes when exercised
Private mortgage insurance
- May or may not be tax deductible - Is required if your equity is less that 20% - Costs about one percent of the loan amount per year
Part B of Medicare is:
- Means tested - Optional - Partially funded by a 3.8% surtax - Partially funded by monthly premium paid by insured
What are eligible "Itemized Deductions"?
- Medical and dental expenses - Taxes paid - Gifts to charity
Employers withhold from employees' paychecks the following:
- Medicare - Social Security - Federal income taxes
Eligibility for Social Security benefits
- Minimum of earned income in each of those quarters - Be an American citizen or legal alien - 40 quarters of covered employment
What does FICO use in the formula to calculate your credit score?
- Mix of credit cards and loans - Length of credit history - Debt-to-credit ratio
What is "consideration" when creating a contract?
- Money - Physical objects - Services
Medicare Part B and D
- Monthly payments of those covered are "means tested" - Membership is optional - Coverage is not 100%
Forbearance of student loans means
- Neither principal or interest is paid - The amount of the loan increases - Payments are put on hold - All the above
Medicare Part D
- Optional - Means tested - Financed 25% by monthly premium paid by insured - Financed 75% by taxes
Social Security benefits are available for
- Orphans - Widows/widowers - Spouses
What is a partnership?
- Owned by 2+ entities, may have large number of partners - General partner: manages + runs partnership, unlimited liability - Limited partners: invest in business, liability is limited to amount of their investment - Business survives death of a partner - Partnership does NOT pay federal income tax -- individual partners pay federal income taxes at their individual tax returns
What is the best way to establish good credit?
- Pay at least the minimum balance due on time and over time - Always mail your payment at least five days before the due date - Manage your total debt/credit ratio - Preserve history - Create the right credit mix - Do not apply for a lot of additional credit at once
After age 59 1/2 if a Roth IRA has been open for at least 5 years you can
- Pay no taxes on withdrawals - Take out all you want without penalty - Not be subject to any RMD
For the best credit score, what is recommended?
- Pay your bills on time over time - Pay at least the minimum balance on all cards - Keep your debt to credit ratio to 30% or less
Triple net lease is where the tenant pays for:
- Property taxes - Insurance - Maintenance
A landlord may not discriminate against anyone on the basis of:
- Race - Sexual orientation - Religion
What are the greatest factors determining credit score?
- Record of paying bills on time over time - Debt-to-credit ratio - Length of credit history - New accounts and recent applications for credit - Mix of credit cards and loans
Stock grants are gifts of stock which may come with:
- Restrictions - Vesting requirements - Potential tax obligations
What is the kiddie tax?
- Restricts ability of parents/grandparents to shift investment income from themselves to their children and grandchildren to avoid higher tax brackets - Unearned income over $2,100 of children < 19 (or 24 if full-time student) is taxed as ordinary income - Does not apply to a child's earned income
Which of the following is subject to a credit card fee?
- Return check fee - Cash advance fee - Foreign exchange transaction fee
Municipal bonds may be secured by:
- Revenue - Taxes - Assessments
When you lease a car, you are responsible for:
- Sales tax - Registration fees - Auto insurance
The FDIC guarantees the following:
- Savings accounts - Certificates of deposits - Checking accounts
What is an exchange traded fund?
- Securities that track an index, but trade on an exchange like a stock - Typically consist of a bundle of stocks identical to those that comprise a specific index, providing instant diversification within an industry, geographic area, or other specified category
When investing in stocks, these practices are NOT recommended:
- Selling short - Stop orders - Day trading
Who can receive Social Security benefits?
- Seniors (66 + 4 mos. for full benefits, 62 for reduced benefits) - Paid at least 40 quarters of employment into the system - Citizens
What do value investors look for in a company stock?
- Stocks that have stumbled and have shares at "bargain" prices - Broken stocks, not broken companies
What do dividend investors look for in a company stock?
- Stocks that pay above average dividends, companies that have a history of raising dividends each year - Income rather than growth
Adjusted Gross Income ("AGI") is what you get after subtracting from total income, specific deductions:
- Student loan interest - Alimony paid - Tuition and fees deduction
What were the two or three biggest reasons that caused the Great Recession?
- Subprime mortgages
Characteristics of the Great Recession
- Subprime mortgages extended credit to people who could never meet the payment terms of their loans - Fees to originators were larger for subprime loans than those of conforming loans - Borrowers took out Adjustable Rate Mortgages which began with lower teaser rates of interest
What is the 20% pass-through deduction?
- Tax deduction of 20% of business income from a proprietorship, partnership, limited liability corporation, or S-corporation - Only remaining 80% of the income is taxed at the taxpayer's marginal rate - Available even if the filer does not itemize deductions
Potential benefits of real estate investing
- Tax deductions - Deferred capital gains - Leverage
What does homeowners' insurance cover?
- The structure of your home - Your personal belongings - Liability protection - Additional living expenses
Characteristics of subprime borrowers
- They lived in lower income neighborhoods - They tended to have substantial credit card debt - Lenders required little or no down payment or equity
Which sources of income are taxable?
- Tips - Commissions - Bonuses
What is the net asset value of a mutual fund? How often is it published?
- Total market value of the fund's holdings (including cash) divided by the number of the fund's shares outstanding at that time - Posted once a day, after the market closes
What are the names of the three major credit reporting agencies?
- Transunion - Equifax - Experian
To protect yourself from fraud and identity theft do NOT:
- Use Wi-Fi hot spots for e-banking transactions - Do not sign out of public computers - Always carry your Social Security card or number with you
Is Social Security broke?
- Used to collect at a surplus, which was then borrowed into the US Treasury's general fund - Reserves will likely be gone by 2030
Credit report facts:
- Voluntary requests to see your credit report are authorized by you - A landlord cannot see your credit report without your approval - An employer must have your written permission to access your credit report
When entering into a contract, which is important?
- What constitutes the end of the contract? - What happens if any party fails to perform? - All blanks should be filled in
What is important when signing a contract?
- What is the reputation of the other parties? - Is mediation of arbitration required? - What constitutes the end of the contract?
What is the relationship between interest rates and the value of previously issued bonds?
- When interest rates go up, bonds which were previously issued decline in value - When interest rates go down, previously issued bonds increase in value
What's a default on a bond?
- When the bond issuer fails to make an interest or principal payment within the specified period
"Yield" is the return earned by a bond. Which are types of bond yields?
- Yield to maturity - Current yield - Coupon yield
Methods that are a form of identity theft:
- You receive an email from your bank asking you to update your account information including your social security number. - Mail has been stolen from your mailbox - Your wallet or purse is stolen
Methods that are not a form of identity theft:
- Your credit card statement has a charge on it you do not recognize.
When contributing to an IRA, consider:
- Your earned income - Traditional vs. Roth - Whether you're covered by an employer plan
401(k) facts
- Your employer may contribute matching funds - Participation may be required unless you opt out - Your employer may not have a Roth 401(k) plan - It is portable
Included in your credit report:
- Your employment history - Your student loan payments - DUIs
Types of vesting
- graded vesting - cliff vesting - 100% vesting
What are the best days to buy/lease a car?
1. The last two days of the month 2. Between Christmas and New Year's Day 3. When last year's models are sitting on the floor after next year's models have started to arrive.
What is the interest rate on student loans tied to?
10-Year Treasury Note
Federal student loan interest rates are linked to:
10-year Treasury rate
Long term capital gains are taxed at a maximum rate of
20%
Qualified stock dividends are taxed at a maximum rate of
20%
What is the current maximum long term capital gain (long term capital tax rate)?
20%
"Benchmark" home loan
20% down payment and a 30-year loan with a fixed rate of interest
benchmark loan
30-year fixed rate mortgage with 20% down
When financing a new car, the loan should not be for more than:
36 months
According to the IRS, what percentage of households has a net worth of at least $1 million?
4.90%
According to the Census Bureau, what % most closely represents the number of children born out of wedlock?
40%
Of all the money the government spends, approximately what % is spent on senior citizens?
40%
Approximately what % of millionaires are self-employed or own a business?
50%
Typical real estate commissions
6% of the sales price; typical to negotiate lower on higher-priced homes
Subprime FICO score
620-660
Seniors are eligible for Medicare at age
65
Are SS benefits tax-free to seniors? Are they taxable income?
85% of benefits are taxable to the individual, but may be excluded for lower-income
What is an overdraft fee?
A fee for when you charge more than your credit limit
Profits from partnerships are taxed as:
A maximum 20%
What percentage of total debts would be your limit -- including student loan debts etc.?
A monthly mortgage payment, including principal, interest, insurance, and property taxes, should not exceed 28% of your gross monthly income
Escrow
A neutral third party which holds the documentation and money involved in the transaction until completed
A home equity loan is
A one-time lump sum loan secured by the property, with a fixed rate of interest, to be paid off with equal monthly payments over several years
What is a grace period?
A period in the billing cycle during which no penalty is due as long as payment is received on time by the lender
A home equity line of credit is
A revolving line of credit
What are the differences between active and passive real estate investors?
Active means the individual spends > 50% of their working hours a year actively involved.
Second mortgage
Additional loan taken against a property
Cost of life insurance premiums is based on:
Age, sex, smoking, health, occupation, etc.
Tax-sheltered means
All gains accumulate tax free within the account
Rapid Rescore
Allows borrowers to pay down debt or correct errors and get accurate information updated in their credit files in just a few days rather than months
What is a 1031 exchange?
Allows you to trade a property and defer taxes on capital gains by exchanging or replacing that property with another property, instead of selling it outright and paying the capital gains tax
A credit card "hold" is limited to:
An arbitrary amount
A 401(k) plan can only be established by:
An employer
What is the first thing you should have when starting a business?
An idea
What is not a prepaid card fee?
Annual fee
What is current yield?
Annual interest payment divided by the market price of the bond
Common tax credits
Are worth more than tax deductions
How are REIT dividends taxed?
As short term ordinary income to the shareholder
How often do we want to reallocate/rebalance our portfolios?
At least once a year
The fee charged by the new provided when you transfer the balance from one credit card to another is called a
Balance transfer fee
What are the best times to have a car analyzed by a qualified mechanic?
Before a warranty expires, or before you purchase a used or previously leased car
The "cornerstone" of wealth is
Being frugal
Stock options are granted by
Board of directors
Which of the following is not a good use of debt?
Borrowing money for a vacation
trading on margin
Borrowing money from brokers to purchase stock, not advisable
Who can contribute to a 401(k) plan?
Both employees and employers (through matching)
Conventional wisdom is you make your profit in real estate when you
Buy a property
How does the gov't subsidize home ownership?
By letting homeowners tax deduct mortgage interest on a mortgage up to $750,000
If you inherit an IRA or Roth IRA
Check current rules with a professional before touching the money
One way to compute the value investors are currently paying for a stock ("P/E" ratio) is to
Compare the market price of a single share of stock with what a single share earned in profits the prior twelve months
Bonds issued by corporations are secured by the
Corporation's assets
How do you calculate in real estate your cost basis?
Cost basis = Purchase Price + Capital Improvements - Depreciation
Emergency fund--what is it?
Covers 3-6 months of living expenses in event of illness, job loss, other emergency -- to keep you from sliding into debt
State disability insurance
Covers workers who suffer a loss of wages when they are unable to work due to a non-work related illness or injury.
What's the first step in saving money?
Create a budget plan to track, estimate, adjust income and expenses
What could be a risk to the value of a REIT?
Cyclical and consumer slumps in the economy
Interest in a credit card account is normally calculated:
Daily
If you own investment real estate, depreciation will reduce your operating profits. Does that cause your taxes to increase or decrease?
Decrease
When interest rates rise, the price of existing bonds in the marketplace will
Decrease
A 401(k) Plan is a
Defined contribution plan
If you cancel an inactive credit card, will it increase or lower your credit score?
Depends on the age of the card. Destroying your oldest cards means decreasing your length of credit history, which could lower your score.
go-to rate
Determined by credit report info
variable rate
Determined by what the banks give to their best customers
The wash sale rule is designed to
Disallow certain losses in the trading of securities
What is the best way to reduce risk when investing?
Diversify
Do REIT dividends tend to be higher? If so, why?
Dividends tend to be higher bc corporate level isn't paying taxes on their profits. If you put them in a tax sheltered account, all dividends compound (BIG advantage)
For the best credit score, what is not recommended?
Do not borrow money or use a credit card
When should you buy mutual fund shares?
Don't buy them at the end of the year, wait until after year end distribution is made. This is because the distribution will be given back to you, and becomes taxable income, as well as distributions lowering the NAV of a mutual fund.
Which of the following is not subject to a credit card fee?
Early payment fee
What is the most important factor in determining whether investors will pay more for stock in the future?
Earnings (specifically the prospect of future earnings) are the single most important factor in determining whether investors will pay more for a stock in the future
The burden of saving and investing for retirement and healthcare is shifting more and more from the:
Employer to employee
To get a credit score, what are the things that you have to have reported about you?
Employment history, lawsuits, judgments, arrests, DUI's, bankruptcies, records of all loans, credit cards, bank accounts, etc.
What's the difference between an estate tax and an inheritance tax?
Estate taxes are paid by estate, while inheritance taxes are paid by beneficiary of the estate
How many credit scores do most people have?
Everyone has three different FICO scores
In looking at subprime mortgages, what kind of credit scores were they looking at?
FICO scores of 660 and below
T/F: "Frugal" means spending freely regardless of value, needs, and benefits
False
T/F: 401k plans are portable and can be rolled into a traditional IRA, but only if you pay all of the required taxes
False
T/F: A 401(k) plan provides an economic way to borrow money from the plan
False
T/F: A default rate of interest is a lower rate of credit card interest
False
T/F: A first mortgage guarantees payment of a second mortgage
False
T/F: A good dividend usually pays less than the interest rate on a 10-year treasury bond
False
T/F: A prepayment penalty is when you send in your monthly mortgage payment before it is due
False
T/F: A sole proprietorship continues after the owner dies
False
T/F: A sole proprietorship has limited liability
False
T/F: A sole proprietorship is owned by two or more people
False
T/F: A spending plan enables your money to manage you
False
T/F: AGI is what you get after subtracting deductions from total income, including charitable deductions
False
T/F: About 50% of employers are using credit checks as part of the hiring process. This is legal even if the employer does not have your permission
False
T/F: Because there is a vast and active real estate market, it takes less time to sell a house than to sell a stock
False
T/F: Both Part A and Part B of Medicare are free to all eligible seniors. But Part D is paid is paid for by the individual
False
T/F: Closed end funds listed on an exchange trade at their NAV
False
T/F: Congress eliminated any marriage tax penalty in 2013
False
T/F: Debit cards are unsecured because the money is in your account
False
T/F: Debts incurred before the marriage took place, are shared responsibilities
False
T/F: Decreasing your deductible will lower your policy cost
False
T/F: Depreciation in real estate increases the operating profit for tax purposes
False
T/F: During the Great Recession, originators and lenders carefully verified all information
False
T/F: Earned income includes insurance proceeds
False
T/F: Employers withhold income from a sole proprietorship from employees' paychecks
False
T/F: Estate taxes are paid by the beneficiary of the estate, while inheritance taxes are paid by the estate
False
T/F: If you charge more than your credit limit, you'll get a late payment fee
False
T/F: If you have a stock in a tax-sheltered account(IRA, 401(k)), you're not declaring tax losses, so you can buy/sell & there are no wash sales.
False
T/F: If you live in a earthquake zone your standard homeowner's policy will automatically cover you for a loss due to earthquake
False
T/F: If you pay off the balance each month your credit score will be lowered
False
T/F: If you sell your house at a loss you can use that loss to offset ordinary income up to $3,000 a year
False
T/F: If you standard deduction exceeds your itemized deductions, you must pay tax on the difference
False
T/F: In a 401(k) you can select investments the same way as in an IRA
False
T/F: In an IRA, home equity loans are tax sheltered
False
T/F: Installment debt used to purchase big-ticket items is usually an interest only loan to be fully repaid at the end of the term
False
T/F: Interest earned on corporate bonds is tax deductible
False
T/F: Interest on US govn't bonds is free from federal income tax
False
T/F: Interest on a home mortgage may be tax deductible and increases taxable income
False
T/F: Interest on corporate bonds is tax free but subject to the AMT
False
T/F: Interest paid on credit cards is tax deductible
False
T/F: It can be a good idea to borrow money to buy stocks.
False
T/F: It is recommended to personally guarantee (putting up your house, car, etc.) the loan for starting a business if the lender asks you to.
False
T/F: Limit orders protect you from losing money on a stock
False
T/F: Limited liability corporations are popular because of their high dividend payouts
False
T/F: Liquidity is a potential benefit of real estate investing
False
T/F: Low price stocks make more money than high price stocks.
False
T/F: Low price stocks will make you more money than high price stocks
False
T/F: Most credit card companies charge an inactivity fee if you have not used your card for at least 6 months
False
T/F: Most millionaires chose their occupations based upon how much money they would make
False
T/F: No fault insurance enables you to sue your own insurance company if the other party is at fault and has no insurance
False
T/F: Number of dependents is an eligible "Itemized Deduction"
False
T/F: One of the best ways to borrow money is to take out a loan from your 401(k)plan
False
T/F: One way to get the best deal on a new car is to tell the dealer you are prepared to pay cash
False
T/F: Operating profits from an apartment building are taxed as long term capital gains
False
T/F: Principal yield is a type of bond yield
False
T/F: REITs tend to pay very low dividends to shareholders
False
T/F: Reduced Social Security benefits for early retirement are available at age 55
False
T/F: Reducing the size of your mortgage can help reduce the cost of your homeowner's insurance
False
T/F: Roth IRAs have a required RMD, whereas traditional IRAs do not
False
T/F: Smart car buyers let the dealer know upfront they have a trade-in to sweeten the deal on a new car
False
T/F: Social Security benefits are exempt from federal taxes
False
T/F: Social Security still collects more than it pays out
False
T/F: State taxes, local taxes, and your residential property tax are all deductible up to a total amount of $20,000
False
T/F: The FDIC guarantees money market funds
False
T/F: The IRS does not recognize same-sex marriages for tax purposes
False
T/F: The annual rate of interest is the same as the APR
False
T/F: The cost of repairs and maintenance adds to the cost basis of your house for tax purposes
False
T/F: The land is covered by a homeowner's insurance policy
False
T/F: The most important part of your credit report is your credit score
False
T/F: The net asset value (NAV) of a closed end fund is determined by multiplying the earnings per share by the number of shares
False
T/F: The net asset value (NAV) of a closed end fund is determined by the board of directors
False
T/F: The net asset value (NAV) of a closed end fund is determined by the yield on its dividend
False
T/F: To alert you to possible identity theft the IRS will email or call you
False
T/F: Under the "Card Act" the interest default rate may not exceed 35%
False
T/F: Unearned income includes capital losses
False
T/F: When a partner dies, the partnership terminates
False
T/F: When a remodeling job is completed, any remaining mechanic's liens will automatically be cancelled
False
T/F: When a sole proprietor dies, the business goes to his/her heirs tax free
False
T/F: When renting an apartment, the landlord may request a copy of your credit report, a letter verifying your employment and pay, and your religious preference
False
T/F: With a 401(k), you must contribute the same amount each year
False
T/F: You can contribute more than your earned income to an IRA account.
False
T/F: You can withdraw $10,000 to buy or build a house from your traditional IRA and without penalty or payment of taxes
False
T/F: You can withdraw higher education expenses from your traditional IRA without penalty or payment of taxes
False
T/F: You can withdraw permanent disability expenses from your traditional IRA without penalty or payment of taxes
False
T/F: You have to pay your bill before leaving the hospital.
False
T/F: The Credit Card Act also deals with business credit cards (in addition to consumer credit cards).
False, it does not deal with business credit cards
What is a balance transfer fee?
Fee which might be charged by a new lender if you transfer the balance from your credit card provider to another
What is our definition of a 21st century millionaire?
Financially independent, living the life they want to lead, able to take care of themselves w/out financial help from government sources
When a foreclosed house is sold, are the proceeds held proportionally between the holders of the first or second mortgage? How is it divided?
First mortgage is paid off first, then second
What is coupon yield?
Fixed percentage rate of interest based upon the par value of the bond
FSA
Flexible Savings Account. Similar to HSAs, but are an employer-only sponsored plan, with money deducted from your paycheck on a pretax basis. Money not spent at the end of the year is forfeited.
What happens if the borrower stops paying the mortgage?
Foreclosure
A sole proprietor reports business profits or losses to the IRS by filing a
Form 1040 Schedule C
What is a W-2 form?
Form from your employer that evidences your earned income
People who apply for Part A of medicare, how much do they pay for?
Free to seniors to who apply
In a partnership the general partner:
Has unlimited liability
What's the difference when it comes to a financial advisor between suitability and fiduciary standard?
Having a "fiduciary duty" standard requires that the advisor put the best interest of their clients first, rather than just making recommendations that are deemed "suitable."
What's an HMO?
Health Maintenance Organization; members pay a flat monthly fee to an HMO for coverage, regardless of usage. There is little to no deductible or co-payment at the time of service.
HSA
Health Savings Account. Tax-sheltered account allowing you to set aside dollars to pay out-of-pocket medical expenses.
Example of an excise tax
Highway use tax
What is the rule of 72?
How long it will take a sum of money to double at a given interest rate, assuming interest is compounded annually - Ex. Dividing 72 by interest rate of 8% → 9 years to double - Ex. Dividing 72 by 10 years → need interest rate of 7.2
The Rule of 72 is used to estimate
How long it will take to double your moneyy
The "Rule of Fred" is
I get paid first
What is the rule of Fred?
I get paid first
Is owning real estate during a recession a good thing?
If selling no, if buying yes
What is a wash sale?
If you sell something that goes up/down in price within 30 days before/after, cannot use the loss for tax purposes
What is a wash sale?
If you sell stock at a loss, and then buy that same stock back within 30 days before/after, you cannot use that loss for tax purposes
What is a triple net lease?
In addition to rent, the tenant is responsible for property taxes, insurance, maintenance, repairs, utilities, electricity, and other items
cost basis
In real estate, cost basis equals the purchase price, plus capital improvements, less depreciation
When interest rates decline, issued bonds ___ in value
Increase
Bonds are rated as to quality by:
Independent rating agencies
Is it good to hold bonds during periods of inflation? Why or why not?
No, as interest rates rise, bonds that were previously issued decline in value.
IRA accounts are tax-sheltered... does that mean all profits are considered long-term capital gains?
No, especially depending on the type of account. In the case of IRAs, tax-sheltered refers to the fact that your earnings are allowed to grow tax-free. They may be taxed upon withdrawal as ordinary income if the account is a traditional IRA, or not at all if the account is a Roth IRA.
If you think you want to buy car when lease expires, can you negotiate the residual price?
No, residual prices are non-negotiable when leasing. They are determined by the cache, quality, reliability, and popularity of the car in the marketplace.
Can a sole proprietorship be owned by a married couple?
No, sole proprietorships are owned solely by one person
Do gift cards expire within 24 months of issue?
No, the law says gift cards cannot expire for 5 years from the date they were activated.
Are the interest rates on federal loans the same for undergrads and grads?
No, undergrads typically have lower interest rates
Can both you and your parents claim you for a tax credit?
No, whoever provides more than half of your support should claim you
If you sell your primary residence at a loss, can you use that to offset income from other sources?
No, you can only offset losses from rental properties
What is a standard deduction?
No-questions-asked deduction to income before calculating your tax - $12,000 for single - $24,000 for married filing jointly
If you go to a dealer with a big inventory, will the car tend to cost you the most?
No. You may find your best buy at a high-volume dealership with a large inventory. Small dealers often buy/trade cars from larger dealers bc they cannot finance a big inventory. You may end up paying a markup between dealers.
Is the maintenance of your house tax-deductible? If so, will it increase your cost basis?
No; only capital improvements (permanent structural improvements which either increase the property's value or useful life) increases your cost basis
To become a millionaire ("financially independent") in today's dollars, it is required for a household to have annual income of at least:
None, there is no annual income requirement to become a millionaire
If you have a plan to contribute to, is diversification required by your employer?
Not required, but you should make sure to pay attention to this (don't invest too heavily in your own employer)
Negative amortization
Occurs when the loan payment is not sufficient to cover the interest cost and results in the unpaid interest being added to the original balance, causing the loan amount to increase.
What are the advantages of having a Roth IRA?
Once contributed to the account, your money, even after compounding for many years, may never again be subject to taxation.
When do you start needing life insurance?
Once you have people depending on your income for support.
What is a good dividend?
One w/ a current yield greater than the interest rate on a 10-year treasury bond
Interest income is taxed the same as:
Ordinary income
Short term capital gains are taxed as:
Ordinary income
By comparing the current price earnings ratio of a stock to its growth rate, we can determine its
PEG rate
Which Parts of Medicare have deductibles?
Parts A, B, and D
Which Parts of Medicare are optional and means tested?
Parts B and D
Social Security is a
Pay-as-you-go plan
What is a closed end fund?
Pooled investment portfolios which raise money by issuing and selling a set number of shares in an initial public offering, then listed on an exchange and publicly traded
What's a PPO?
Preferred Provider Organization. Allows you to choose from a group of providers who have their own contracts with your insurance company. You usually have copays, coinsurance, and deductibles at the time of service.
Fees for inactivity, loading money, monthly maintenance and checking your balance are common to
Prepaid cards
What is a P/E ratio?
Price/Earnings tells you what the market is currently paying for each dollar of earnings
If a single person lives in a house for 2 of the last 5 years and then sells it for a profit, how much of that profit is tax-free? What about this situation for a married couple?
Profits up to $250,000 (single) or $500,000 (married) are tax-free
One of the biggest drawbacks in investing?
Properties are illiquid--they don't sell right away
The government subsidizes home ownership through the tax code by allowing a tax deduction for
Property taxes
What is a notary public?
Public officer constituted by law to witness execution of certain classes of non-contentious documents... including mortgage documents, trusts, power of attorney for healthcare....
The IRS requires those who have significant income not subject to withholding tax to pay
Quarterly estimates of additional taxes owed
Revolving credit is when you can:
Re-use your credit line over and over
To avoid a late payment fee, if paying by mail the payment must be:
Received by the due date
What is compounding?
Receiving interest on interest
What is a defined benefit pension plan?
Retirement/pension plan where the employer promises an employee a specific defined lifetime monthly benefit upon retirement
In a typical real estate transaction, who pays the sales fee/commission?
Seller
Under Social Security the employer and the employee
Share equally in the cost of the program
If you buy a house in foreclosure, you fix it up and sell it in 6 months, is the profit you make considered a long or short term capital gain?
Short term capital gain because property was sold one year or less from its date of purchase
What's the difference between a long-term and a short-term capital gain?
Short term capital gains are added to your income and taxed at your individual tax rate (max 37%) Long term capital gains are subject to: - 20% if above $425,800 single, $479,000 married - 15% if above $38,800 single, $77,200 married - 0% if lower than that
Form 1040 is used to report
Short-term and long-term capital gains and losses
What is the best way to conclude a contract?
Sign a written agreement
Seniors take out ___ times what they put into Social Security
Six
A business owned by one person with unlimited liability
Sole proprietorship
In dividends in all these types of plans, are they subject to income tax in the year that the dividends are received?
Some. Traditional 401(k) and IRA distributions are taxed as ordinary income in the year received. Roth 401(k) and Roth IRA distributions are tax-free.
What is a K-1 form?
States the financial information required to be filed with the partner's individual tax return
What is a stock option?
Stock options give one a right, but not an obligation to buy a stock at a set price within a specified period of time
What do growth investors look for in a company stock?
Strong companies with sales/earnings that could grow 15% or more from year to year
What is the best place to use a credit card?
Supermarket
One way to increase your credit score is to:
Take out a new credit card and stop charging
You can't discriminate on the basis of race/religion/creed/etc, except for one case. What is that one case?
Taking a boarder into one's primary residence
Are withdrawals from a traditional IRA taxable or tax-free?
Taxable as ordinary income
What is the difference between term-life insurance and whole-life insurance?
Term insurance is strictly "death insurance," while whole life insurance combines the cost of death or term insurance with a savings component called the "cash value."
If you enter a market order to buy, the price you pay will be
The "ask" price
If you enter a market order to sell, the price you sell at will be
The "bid" price
Bonds issued by the federal government are guaranteed by:
The United States of America
What is a deductible?
The amount you pay each year before the insurance company makes any payment at all. The higher the deductible, the lower the cost of the policy.
Corporate dividends are determined by:
The board of directors
Your last online stop when purchasing a used car should be "Carfax" to find out if:
The car has been stolen or salvaged
When entering into a contract, which of the following is not important?
The contract must be witnessed by a lawyer
What are typical benefits under workman's compensation insurance?
The cost of medical care and payment of a worker's pay up to a maximum number of weeks or months.
Short sale
The current market value of the home is worth less than the amount of the loan
Who does the salesperson on the floor represent?
The dealer
Equity
The difference between the current market value of the property, less what is owed on the mortgage(s) and any other debts against the property; what you would receive if the property were sold and all debts against the property were repaid.
In real estate, equity is
The difference between the value of the property less all debts against the property
Who is state disability insurance paid by and how?
The employee, through payroll deductions.
What happens when your partner in business dies?
The enterprise survives the death of a partner.
What is the marriage tax penalty?
The fact that for those who are married there may be additional taxes due if their combined income exceeds $400,000
IPO
The first time a corporation sells stock to the public (Initial Public Offering)
The "bid" of a stock is
The highest price a buyer is willing to pay
If you carry a credit card balance:
The interest rates for purchases, cash advances, and convenience checks may be different
Under the Federal Reserve Rules, what is the limit they can charge you for an overdraft or late payment fee?
The late payment fee cannot be greater than your minimum payment. The overdraft fee cannot be greater than the amount you overcharged by.
In a foreclosure
The lender legally repossesses the house
If you sell a house at a loss
The loss is not tax deductible
If you're a working couple and both of your incomes are needed to get a home loan, will the lender charge you interest based on the highest credit score or the lowest credit score between the two of you?
The lowest credit score
The "ask" of a stock is
The lowest price a seller is willing to sell
What is the dealer's invoice price?
The manufacturer's price to the dealer before various rebates, allowances, discounts, and incentive awards. Touted as the price the dealer paid for the car, but typically excludes the dealer holdback which is designed to ensure that the dealer makes a profit.
Residual cost
The predetermined value and purchase price of the car at the end of the lease
What are the advantages of term-life insurance?
The premium per thousand dollars of insurance is much lower due to whole life insurance having the forced saving component and higher commissions.
Capitalized cost
The price you and the dealer agree upon for the car to be valued at the time of the lease
Real estate commission on a property sale is paid by
The seller of the property
What is co-insurance?
The share of the bill that you pay after you have met your deductible. Insurance pays the rest up to the policy's limits.
The legal limit on interest applied to unpaid credit card balances is:
There is no limit
What happens if a REIT distributes 90% of more of its income to shareholders?
They get to pay no tax on corporate income
If your stock option is not exercised by the expiration date what happens to them?
They terminate
How far down the road should we look when deciding whether or not to buy a stock?
Think about 16-18 months into the future.
If you and a spouse/partner apply for a mortgage, how many credit reports will they get on each of you?
Three credit reports on each buyer
How many times your gross annual income(of you or a partner) will a lender tend to lend you?
Three times your annual gross income
What's the single most important reason to buy life insurance?
To create an estate upon death.
What's a debt to credit ratio?
Total balance on your credit cards and other loans compared to your total credit limit
Where does the majority of the money that is made in the market come from?
Trends (being in the right asset class at the right time)
T/F: 403b plans are defined contribution plans established by non-profit organizations
True
T/F: A 401(k) does not guarantee a lifetime monthly benefit in retirement
True
T/F: A Roth 401(k)plan can be rolled over into a Roth IRA without regard to the Roth IRA contribution limits
True
T/F: A certified check is a personal check guaranteed by a bank
True
T/F: A credit card grace period may not apply to cash advances or balance transfers
True
T/F: A dividend investor focuses on stocks that pay above average dividends
True
T/F: A person with an obligation to repay a loan is referred to as a "debtor"
True
T/F: A point on a home loan equals one percent of the loan and isn't tax-deductible.
True
T/F: A secured debit card takes money out of your bank account, but does not necessarily help you establish credit
True
T/F: A traditional 401(k)plan can be rolled over into a traditional IRA, tax and penalty free
True
T/F: A variable rate of interest is now commonly used by credit card issuers
True
T/F: AVOIDING taxes is legal... EVADING taxes is illegal
True
T/F: Accounts at credit unions are guaranteed by an agency of the federal government up to $250,000
True
T/F: Any matching contribution by an employer must go into a traditional 401(k)plan
True
T/F: Around 90% of hospital bills have over charges, so it is wise to look at the bill.
True
T/F: As you get older, the annual cost for term and whole life insurance increases.
True
T/F: A non-owner collision and liability policy is designed for those who rent cars, but do not own them
True
T/F: Banks may waive over the limit fees and late penalties the first time if you ask
True
T/F: Because of the hacking of business and government data centers, a security freeze on your account may be a good idea
True
T/F: Beware of "credit repair" companies who charge upfront fees for credit advice
True
T/F: By definition, a proprietor can borrow money to help get the business going, but cannot sell shares in the business
True
T/F: By dollar-cost-averaging, you will buy more shares at lower prices
True
T/F: California has a mandatory state disability plan.
True
T/F: Capital losses may be used to offset capital gains for tax purposes
True
T/F: Child support is not taxable income
True
T/F: Compounding means earning interest on interest
True
T/F: Contributions to a 401k plan may be tax deductible to the employee
True
T/F: Credit card statements must include a toll free number you can call for credit counseling services
True
T/F: Credit unions are non-profit organizations owned by their members
True
T/F: Disability insurance is NOT unemployment insurance. To be covered you have to be employed.
True
T/F: Dollar for dollar, term insurance gives you the most protection for your money
True
T/F: Employer's pension is a good example of a defined benefit plan
True
T/F: Every time a credit or debit card is used, a transaction fee is paid by the merchant to the card issuing bank
True
T/F: Exchange traded funds track an index and trade like a stock
True
T/F: Federal student loans have the potential for student loan forgiveness
True
T/F: For an account in good standing, interest rate increases can only apply to new charges, not prior balances even if there are current changes in a credit report or a credit score
True
T/F: Fraud may void an entire contract
True
T/F: Fred does not recommend selling short or using stop orders.
True
T/F: HSAs MUST be used in conjunction with high deductible health plans
True
T/F: If a child is away at college, he/she may still be claimed as a temporary dependent for tax purposes
True
T/F: If the reason you bought the stock/fund no longer exists, you should sell it
True
T/F: If you are charged penalties and fees, those are added on to your balance and unless you pay them off right away you will start paying interest on penalties and fees
True
T/F: If you are more than 60 days late in making the minimum payment, the issuer may charge you the interest default rate
True
T/F: If you are self-employed you may be able to contribute and tax deduct over $50,000 into a Solo 401k plan
True
T/F: If you borrow money you should know how you're going to pay it back
True
T/F: If you inherit anything, you can keep it as separate property, even if you're married
True
T/F: If you make a payment in excess of the minimum, you want it first applied to the loan with the highest rate of interest
True
T/F: If you're renting living quarters, the contract with the landlord is an enforceable, legal contract
True
T/F: In a corporate liquidation or bankruptcy, the common shareholders are usually the last to get pad
True
T/F: Interest on US govn't bonds is free from state and local taxes
True
T/F: Interest on a new home mortgage is tax deductible up to a $750,000 mortgage loan amount
True
T/F: Interest on payday loans can legally exceed 300%
True
T/F: It is best not to use a debit card for hotels or car rentals because they will probably put a hold on your account
True
T/F: It is estimated that 50% of marriages now have prenuptial agreements, and the most common reason for them is death, not divorce
True
T/F: Leading up to the Great Recession, some loan originators falsified applicants' financial status to increase their fees and commissions
True
T/F: Limited partners have limited liability
True
T/F: Loans taken out after marriage in a community property state could become community property
True
T/F: Longevity has replaced retirement as a major social economic issue
True
T/F: Matching 401k employer contributions must always go into a traditional 401k, not a Roth 401k
True
T/F: Merchants would rather you use a debit card because the fees are less for them
True
T/F: Most workers pay more Medicare and Social Security taxes than they do income tax
True
T/F: National student loan debt now is greater even than credit cards debt.
True
T/F: On a lease, you still have to pay sales tax every month, the registration fee every year, and are required to maintain the car based on the manufacturer's guidelines.
True
T/F: Once you commingle anything (inheritances and gifts) it becomes community property
True
T/F: One way to compound growth is to reinvest your dividends in stock.
True
T/F: Only when you take a boarder into your primary residence, do the rules regarding discrimination not apply
True
T/F: PMI can become a factor if your equity in the house is less than 20%
True
T/F: Partnerships do not pay federal taxes
True
T/F: Partnerships issue a K-1 to each partner
True
T/F: Payments on student loans are tracked by credit reporting agencies.
True
T/F: People that have high credit scores tend to have lower delinquency rates, thus they get better interest rates
True
T/F: Private student loans may cost less than federal student loans
True
T/F: REITs are similar to mutual funds bc they are professionally managed
True
T/F: Refinancing a home loan may be a good way to consolidate a first and second mortgage
True
T/F: Separately owned property you can retain on your own if it was acquired before you got married
True
T/F: Sometimes the best thing to own is cash if you really feel that there's going to be better opportunities down the road
True
T/F: Student loan payments are tracked on your credit report and credit score.
True
T/F: The best way to reduce risk is to diversify
True
T/F: The current yield of a bond may be higher or lower than the coupon yield
True
T/F: The definition of disability is critical.
True
T/F: The difference between stocks and bonds is stocks may no promise to pay a dividend or guarantee principal
True
T/F: The information on your credit report determines your credit score
True
T/F: The maximum one may contribute to an IRA is greater for those over age 50
True
T/F: The purpose of the W-4 form is to let your employer know how much to withhold from each paycheck for personal income taxes
True
T/F: There is a tax deduction on IRS Form 1040 for "Tuition and fees"
True
T/F: Under a 1031 Exchange, you can trade a real estate property and defer taxes on capital gains
True
T/F: Under the Healthcare Reform Act, the government established a minimum standard of preventative coverage.
True
T/F: Under "Tenants in Common" each of you own half of the house
True
T/F: Unemployment compensation is taxable income
True
T/F: When a party does not adhere to a term or condition of a contract, the contract is considered breached
True
T/F: When you buy a house/real estate in a neighborhood, you should consider if it can support the price you're paying to be there.
True
T/F: When you go to transfer any money from an IRA or a 401(k) to another IRA or another 401(k), always try to have it done directly (trust-to-trust). You don't want to take possession of the money.
True
T/F: When you make a payment in excess of the minimum, you always want to apply first to the principal of the loan, not interest
True
T/F: When you sell a house, those home equity loans and home equity lines of credit have to be paid off.
True
T/F: With workman's compensation insurance, the insurance is paid by employer, and it only covers job related injury or sickness.
True
T/F: Yearly contributions to an IRA cannot exceed your earned income
True
T/F: You cannot declare a tax loss on a security if you purchase the identical security within 30 days before or after the sale
True
T/F: You do not pay Social Security taxes on interest you earn
True
T/F: You have to have consideration by both parties to have a binding contract
True
T/F: Your loss due to credit card theft is limited to $50 if reported within two days of discovery
True
T/F: earnings == profits
True
T/F: revenue == sales
True
T/F: Homeowner's insurance can cover replacement cost, code changes, and your personal belongings such as clothing
True
T/F: Homeowner's policies cover you worldwide against lawsuits for bodily injury or property damage
True
T/F: Mechanic's liens guarantee payment to a contractor, laborer, or material provider. It is the owner's responsibility to get signed release when payment is made
True
T/F: Interest on bonds issued by states or municipal districts are free from federal or state taxes.
True for federal; depends on the state for state.
Dividends paid by corporations are taxed __
Twice
How is earned income and unearned income taxed differently?
Unearned income is not subject to payroll taxes (SS, Medicare) but will be included in your AGI for federal income tax purposes
What are the goals of owning rental property?
Use the rental income to help pay for mortgage, insurance, taxes, and maintenance, while taking advantage of the tax benefits and the use of borrowed funds
Avoid this credit card mistake:
Using it to withdraw cash from an ATM
Do retail charge cards typically have higher or lower interest rates than credit cards?
Usually higher, as high as 20%-30%
LTV = loan-to-value ratio
Value of the loan related to the value of the house
Which form will your employer require you to complete upon hiring?
W-4
What is CarFax/CarFax.com?
Website allowing you to track a specific car by its VIN. Can tell you if vehicle was ever stolen, declared salvage, its odometer readings, number of owners, and accidents reported.
Short sale
What happens if the value of the house declines to a point where the amount of the loan is greater than the market value of the house. Even if the house is sold, the proceeds will not be enough to repay the loan.
Definition of equity in stocks
When you buy a stock, you are buying a piece of ownership in a business
According to most successful investors in real estate, do you make your profit when you buy the property, or when you sell it?
When you buy the property
When is the best time to establish credit?
When you don't need it
What does a notary public do?
Witnesses the signing of non-contentious documents
Are operating profits from rental real estate taxable?
Yes
Do condos have the same tax benefits as purchasing a free-standing house?
Yes
Does a homeowners insurance policy provide/cover additional living expenses?
Yes
For tax purposes, does the IRS distinguish between people that are active in real estate vs. those that are just passive investors?
Yes
Will capital improvements on a residence increase the cost basis of a house for tax purposes?
Yes
If you're with a non-profit org, and they have a 403(b)? Are they allowed to match your contributions?
Yes, 403(b)s allow matching contributions from nonprofit employers
If you leave your employer, can you roll over your Roth 401(k) plan into a Roth IRA plan?
Yes, and this can be done without regard to the Roth IRA contribution limits or phase outs
There are two types of investment property: residential and commercial/industrial. When you depreciate these properties, is it done on a straight-line basis?
Yes, both are straight-line depreciated, but residential rental property has a time length of 27.5 years, while commercial property is over 39 years.
Can you have a Roth 401(k) plan without a traditional 401(k) plan?
Yes, however since matching contributions made by an employer are tax deductible to the employer, they must go into a traditional 401(k) account.
Can increasing your credit card limit increase your credit score?
Yes, if it decreases your debt-to-credit ratio
Can you open an IRA spouse account? Under what conditions?
Yes, if you have a job, but your spouse does not work during the year
If you have a 401(k) plan at work, could it be that you may not be able to deduct for tax purposes, your contribution to a traditional IRA?
Yes, if your AGI exceeds $73,000. If your income > $63,000 but < $73,000, your contribution limit is prorated accordingly.
Are dividends from corporations taxed twice?
Yes, once at the corporate level, and again at the shareholder's level
Are your contributions to a 401(k) plan tax-deductible to you?
Yes, up to the IRS limit of $18,500 per year
Are 401(k) plans set up for automatic payroll deductions?
Yes, usually When you're partially vested in a 401(k) plan and you quit, will you lose your vested portion? No, you only lose the portion of employer contributions that was unvested. You keep 100% of your contributions and the vested portion of your employer's contributions
Are cars that are more than two years old able to be covered with a warranty?
Yes, usually certified cars have been inspected and tested by the dealer according to the manufacturer's specifications and come with a warranty on at least the major parts for a year or more.
At age 59 & 1/2 can you withdraw money from a traditional 401(k) without paying a penalty?
Yes. Only if you are under 59 & ½ will you pay a 10% penalty
What is the most frequently used definition of disability?
You cannot perform your job or any job for which you are suited.
fixed-rate mortgage
You lock in your interest rate for the entire life of the loan
With a deferred interest plan, if you are late in your payments:
You may be charged interest on the entire balance retroactively
If you own rental property, can you deduct the principal and interest of your mortgage?
You may deduct interest but not principal payments that reduce the amount of the loan
100% vesting
You own 100% of your contributions and your employer's matching funds for which you have qualified. If you leave your job tomorrow, you can take these with you
When you go to title the property, does it make any difference if you're married or cohabitating?
You should always have your name on the title or deed of any property you buy or purchase jointly with another person
What happens if you try to roll a 401(k) from existing plan into a new employer's plan?
You should be able to do this, tax-free, as long as the new plan allows
Cliff vesting
You take ownership of a given year's annual matching funds all at once, but only after you have worked for the company for a specified period of time
Graded vesting
You take ownership of a percentage of the employer's match each year
What is cash or car?
You will get a better deal if you let the dealer think that you will need financing until you have agreed on a price. This is because the dealer will want to sell you financing and insurance for the extra fees and commissions.
Time value to money
You're better off getting a dollar today and investing it than a dollar tomorrow
Under current law, if you are married, the beneficiary of a 401(k)plan is
Your spouse
second mortgage
additional loan taken against the same property as the first mortgage. Riskier because in the event of a default or sale of the property, the first mortgage must be paid off first before the second mortgage can collect
default rate of interest
an accelerated rate of interest, typically 28% to 35%, charged on your credit balance as a penalty when either the issuer did not receive the minimum payment on time, or your payment is not honored by your bank
How are corporate earnings usually expressed?
as EPS, earnings per share
interest
cost of money; goes up w/ inflation, down w/ recession
All credit card statements now have to include a toll-free phone number for ____.
credit counseling services
title insurance
guarantees clear ownership of a property to buyers and lenders
We define "wealth" as:
lifestyle
Adjustable rate mortgage
loans that start w/ a set rate of interest for a defined period of time (1-5 years), after which the rate is "adjusted"
mutual fund
professionally managed portfolios which consist of stocks/bonds/other investments divided into shares
rapid rescore
technique that enables borrowers to pay down debt and correct errors and get accurate information updated in their credit files in just a few days rather than months
negative amortization
the loan amount increases over time due to below market teaser interest rates that add the difference to the principal of the loan
leverage
the use of borrowed funds to buy a house; using other people's money to help you make money
When a lender is willing to loan money without requiring any collateral, the loan is considered:
unsecured
credit card
unsecured line of credit
What is the only federally mandated website where you can get your free credit reports?
www.annualcreditreport.com
If you're buying a used car, is there a way to find out if that car has been reported stolen/declared salvage?
www.carfax.com
When planning the purchasing of rental real estate, always consider:
- Tenant's rights - Emergency repairs - Vacancy rates
Under the Credit Card Act, what is the limit they can charge you for an overdraft or late payment fee?
$39
If you work part-time and make $4000 dollars of earned income + interest + short term capital gains... what's the most you can contribute to your IRA and tax deduct?
$4,000
To be in the top 10% of households, annual earnings should exceed about
$113,000
If your earned income = $100,000 in a year, between you and employer, how much is contributed by YOU and EMPLOYER into SS and Medicare?
$15,300 = 12.4% into SS + 2.9% into Medicare
Losses in excess of gains in any one year can be used to reduce taxable income up to
$3000
What should you check about a real estate investment before purchasing it?
Inspection, zoning, use permits
What is Workman's Compensation Insurance
Insurance paid entirely by employer. Provides coverage, including disability, if an injury or illness is job-related. It is designed to pay an worker rather than have the worker sue his or her employer.
What is the SALT limit?
Itemized deduction for State And Local Taxes, max of $5,000, $10,000 if married
In a partnership, each partner and the IRS receives a
K-`1
A credit card fee may be charged for:
Late payment
The most important part of an auto insurance policy is:
Liability insurance
What kind of things does auto insurance cover?
Liability insurance covers claims resulting from injuries caused to another person or damage to another party's property that was your fault
What is a sector fund?
Like an ETF, but track stocks in a specific industry, geography, or emerging economy
What is a big advantage of REIT compared to owning real estate?
Liquidity, sell/buy in a matter of hrs, if you wanna get out of it you can sell just like any other stock
In looking for a house, what's the one thing that is more important than the price?
Location
The most important factor when purchasing real estate is:
Location
What is not a reason for an IRS audit?
Low credit scores
What's the difference between a closed-end and open-end mutual fund?
Management feeds and expenses tend to be much lower for closed-end funds than open-end funds.
What is an MSRP? What does that stand for?
Manufacturer's suggested retail price. It is not the price you will usually pay, or the best deal you will get. It's the dealer's starting point.
What kind of coverage may or may not be available for rented cars?
Many companies extend your coverage to rental cars when not used for business.
This is the the total market value investors are placing on the stock of a company at a moment in time
Market cap
What is private mortgage insurance?
May be required of you by a lender if your down payment is < 20% of purchase price. It protects the lender from loss in the event of a default for the amount of the loan in excess of 20%
The lower your down payment, does that mean you will pay more interest or less interest over time?
More interest
What non-operating expenses can you deduct from operating profits for tax purposes?
Mortgage interest and depreciation
If you are in a 37% tax bracket, would you be better off buying a corporate bond paying 7.25%, or a tax free municipal bond paying 5.0%, if they were of equal quality?
Municipal bond
If you buy 200 shares of stock in a taxable account for $22,500 on October 1st, sell them for $18,000 on October 12th, and buy back 200 shares of the same stock on October 28th for $19,000, what would be your reportable tax loss?
N/A
Are contributions to a Roth IRA tax-deductible?
No
Does the federal gov't use property taxes to help pay for Medicare?
No
Is it always better to buy from an individual than it is from a dealer?
No