Unit 18 - 65

Which of the following accounts can only be opened by spouses? A) Tenants in the entirety B) Tenants with right of survivorship C) TOD accounts D) Tenants in common

A) Tenants in the entirety

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) a C corporation

Which of the following statements about S corporations is NOT correct? A) Stockholders of S corporations are taxed on the net profits of the corporation, even if they do not receive taxable dividends. B) S corporation status offers greater opportunity for raising additional capital than do other forms of business structure. C) An S corporation may have no more than 100 shareholders. D) An S corporation may have only 1 class of stock.

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

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 is not required to notify the son when an income distribution is made to the father. D) The trustee does not need to keep records of the income distribution to the father.

C) The trustee is not required to notify the son when an income distribution is made to the father.

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 sole proprietorship D) a limited liability company

C) a sole proprietorship

A deceased individual with 2 surviving children and a spouse, had established a trust for his family. The trust document appointed both children as co-trustees. The surviving spouse is to receive current income, and his 2 children will receive equal shares of the remaining principal upon the spouse's death. As the adviser to the account, you A) focus on generating income for the spouse B) focus on increasing principal for the children C) follow the instructions of the trustees D) attempt to generate reasonable income while keeping the principal intact for the children

C) follow the instructions of the trustees

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

D) Settlor—grantor

A married couple wishes to open up 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 with right of survivorship B) Joint tenancy C) Tenants in common D) Tenants in the entirety

D) Tenants in the entirety

Keisha has 3 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 1 of those children dies before Keisha? A) The estate is divided equally between the 2 surviving children and the children of the deceased child B) The estate is divided on a per capita basis C) The estate is divided equally among the 2 surviving children D) The share belonging to the deceased child is distributed per stirpes

D) The share belonging to the deceased child is distributed per stirpes

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

D) Use a simple trust with her daughter as irrevocable beneficiary

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 3 children. She also wants the ability to change the allocation in the event that conditions change and 1 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 an individual TOD account B) as a joint account with tenants in common C) as a joint account with right of survivorship D) under a discretionary power

A) as an individual TOD account

An investment adviser registered with the SEC could have all of the following as advisory clients EXCEPT A) the ABC Unit Investment Trust B) the DEF Life Insurance Company C) Mildred, an accredited investor D) the XYZ Growth Fund

A) the ABC Unit Investment Trust

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) Sally's spouse B) Sally's estate C) Agatha D) the person designated under the laws of escheat in her state

B) Sally's estate

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

B) a person declared mentally incompetent