Series 65: Unit 16 Quiz 1

During the previous fiscal year, The Kaplan Family Trust received $24,000 in dividends and $35,000 in interest from corporate bonds. Securities transactions during the year resulted in long-term capital gains of $48,000, $20,000 of which were reinvested in the corpus. The DNI for the Kaplan Family Trust is A. $87,000 B. $11,000 C. $79,000 D. $107,000

$87k

Under industry rules, customers who wish to trade options must receive a copy of the options disclosure document (ODD) A. at or before account approval B. at or before the mailing of the next monthly statement C. at or before the mailing of the confirmation representing the first options trade D. within 15 days of account approval

At or before account approval

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. Social Security number B. date of birth C. a physical address D. current employment status

Current employment status

With respect to taxation, an investment adviser representative should not A. explain the taxable status of particular investments. B. draft tax and estate documents to ensure compliance with current law to provide substantial after-tax returns. C. consider tax implications as a way of improving a client's after-tax returns. D. discuss the tax implications of investments.

Draft tax and estate documents to ensure compliance w/ current law to provide substantial after-tax returns

Which of the following actions should be taken by an agent when a client decides to open an options account? A. Obtain approval from the designated options supervisor to open the account no later than 1 business day after the first options trade B. Review with the client the risks involved when trading options before the first options trade C. Assure that an options agreement has been signed prior to the first trade taking place D. Provide an options disclosure document (ODD) no later than 15 days after the first trade

Review w/ the client the risks involved when trading options before the first options trade

The federal legislation that requires broker-dealers to verify the identity of any person opening an account is A. the Securities Exchange Act of 1934. B. the Uniform Securities Act of 1956. C. the Insider Trading and Securities Fraud Enforcement Act of 1988. D. the USA PATRIOT Act of 2001.

The USA PATRIOT Act of 2001

One of your clients dies. You could legally take instructions regarding the individual's estate from A. the administrator in intestacy. B. the spouse of the deceased. C. a person with durable power of attorney. D. a CPA who prepared the deceased's tax return.

The administrator in intestacy

If a customer of your firm receives stock from the estate of her mother, the stock's cost basis in the hands of the customer is A. the market value at date of distribution to the customer. B. the original cost of the stock adjusted for any estate taxes paid. C. the market value at date of death. D. the original cost of the stock.

The market value at date of death

In a trust account, the person who makes the account management decisions is A. the beneficiary. B. the nontrustee custodian. C. the trustee. D. the investment adviser representative.

The trustee

One of your customers would like to be able to reduce current taxable income. Contributions to which of the following would be an appropriate recommendation? A. A deferred annuity B. A donor advised fund C. A Roth IRA D. A Section 529 plan for grandchildren

A donor advised fund

A long term client contacts you to inform you that his lawyer has drafted a trust agreement and wants to name you trustee. You accept, and several months later, the beneficiary of the trust approaches you with a request for a disbursement that is contrary to the provisions of the trust document. In accordance with the provisions of the Uniform Prudent Investor Act, you should A. have a court of competent jurisdiction amend the trust. B. follow the wishes of the beneficiary. C. contact the client. D. follow the terms of the trust

Follow the terms of the trust

If a husband makes a gift of $100,000 to his wife, a U.S. citizen, how much of the gift is subject to gift taxes? A. $50,000.00 B. $0.00 C. $90,000.00 D. $100,000.00

$0

A registered broker-dealer would not be able to open an account for A. the estate of a deceased individual. B. a person deemed mentally incompetent. C. the CEO of a company whose stock is NYSE-traded. D. two unrelated individuals.

A person deemed mentally incompetent

Although all new accounts must be approved by a designated supervisor before any trading activity may take place, there is one type of account that must be approved by a specially qualified supervisor. That would be A. a margin account B. a discretionary account C. an IRA D. an options account

An options account

A grantor retained annuity trust is a planning tool designed to pass assets to beneficiaries (usually children) in a way to minimize A. income taxes. B. estate taxes. C. property taxes. D. excise taxes.

Estate taxes

Under which of the following structures is it likely to have the largest number of owners? A. Sole proprietorship. B. JTWROS. C. Limited liability company. D. S corporation.

Limited liability company

A deceased client's trust account has over 90% of its value invested in a single common stock whose recent performance has been outstanding, resulting in a very large unrealized capital gain at the time of death. What action would most likely be taken by the investment adviser handling this account? A. Selling all of that stock in order to rebalance the trust's assets B. Liquidating a portion of that stock to take advantage of the tax savings offered by the stepped-up basis at death C. Exchanging a portion of that stock for a suitable security held in the adviser's trading account D. Continuing to hold that stock position if it is felt that it meets the objectives of the trust

Liquidating a portion of that stock to take advantage of the tax savings offered by the stepped-up basis at death

As a registered investment adviser, you have managed $10 million of a customer's funds for several years. The customer asks you to prepare a trust for his children, to transfer $3 million of his funds into the trust, and to trade the trust with the same objectives as the existing account. You should A. explain to the customer that trusts cannot be traded. B. refer the customer to an attorney that can set up the trust. C. tell the customer to contact a tax specialist. D. prepare the trust, transfer funds, and begin investing.

Refer the customer to an attorney that can set up the trust

Mr. and Mrs. Williams are a retired couple receiving most of their income from a diversified portfolio of high-quality bonds and preferred stock. One of the reasons that life insurance might be a useful addition to their overall planning is that A. upon the death of the insured, the insurance provides liquidity to preserve income-producing assets from having to be liquidated to cover death expenses. B. dividends received on a life insurance policy are tax free. C. the proceeds of a life insurance policy are free of income tax. D. the premiums can be paid directly from their brokerage account.

Upon the death of the insured, the insurance provides liquidity to preserve income-producing assets from having to be liquidated to cover death expenses

A customer buys 100 XYZ at $30. Two years later, with the stock trading at $70, the customer makes a gift of the securities to his son. Which of the following statements are true? 1. For gift-tax purposes, the value of the gift is $3,000. 2. For gift-tax purposes, the value of the gift is $7,000. 3. The son's cost basis on the stock is $3,000. 4. The son's cost basis on the stock is $7,000.

For gift-tax purposes, the value of the gift is $7k and the son's cost basis on the stock is $3k

One of your ultra-high net worth clients would like to give some low cost basis stock as gifts to her adult grandchildren. It would be prudent for you to tell her that A. it would be wise for her to use a TOD account to avoid probate. B. making the gift under the Uniform Transfer to Minors Act is generally the most advantageous for the child. C. unlike an inheritance, there is no stepped-up cost basis. D. for purposes of the gift tax, her cost basis will be used.

Unlike an inheritance, there is no stepped-up cost basis