SIE Exam Unit 5 - Issues

ETFs are not ideal for __________________ traders due to the commission charges

Due

REITs that can hold both commercial property and residential property

Hybrid REITs

Identify two trading strategies that a hedge fund could employ in its portfolio but a mutual fund cannot. I.Limiting investments to a narrow group of securities within one industry II. Trading on margin to purchase portfolio securities III. Purchasing speculative or low rated securities IV. Selling short stocks

II & IV

Identify two trading strategies that a hedge fund could employ in its portfolio but a mutual fund cannot. I. Limiting investments to a narrow group of securities within one industry II. Trading on margin to purchase portfolio securities III. Purchasing speculative or low rated securities IV. Selling short stocks A) I & IV B) II & III C) II & IV D) I & III

IIV & IV

Which of the following is not a type of real estate direct participation program? A) Existing properties B) Raw land C) Income D) New construction

Income

Costs for those items that would have no salvage value at the end of an oil and gas Direct Participation Program

Intangible Drilling Costs

In instances where a decision to dissolve a limited partnership before its predetermined date is made, an affirmative vote to do so must be taken by who?

Limited Partners

Deductions for depletion would most likely apply to which of the following direct participation programs (DPP)? A) Oil and gas exploratory program B) Oil and gas income program C) Real estate limited partnership D) Equipment leasing program

Oil and Gas Income Program

What are the three types of Direct participation real estate programs?

Raw Land, New Construction, Existing properties

For real estate program partners, tax credits will A) reduce taxable income from rents received dollar for dollar. B) reduce tax liability dollar for dollar. C) be applicable in all types of real estate programs. D) add to the appreciation of the real estate properties.

Reduce tax liability dollar for dollar

Involves actually withdrawing funds from one account for reinvestment in another

Rollover

ETPs are benchmarked to ____________________, ________________, ___________________

Stocks, Commodities, Indices

Costs for items that will have some salvage value at the end of the program

Tangible Drilling Costs

Which of the following are considered intangible drilling costs (IDCs) for an oil and gas DPP? A) Equipment and fuel B) Wages and equipment C) Wages and insurance D) Fuel and interest expenses

Wages & Insurance

Limited partnerships sold publicly via a prospectus offering would be expected to have A) a small group of investors, each contributing a large sum. B) a small group of investors, each contributing a small sum. C) a large group of investors, each contributing a small sum. D) a large group of investors, each contributing a large sum.

A Large group of investors, each contributing a small sum

Hedge funds A) are highly regulated, starting with the requirement to be registered with the SEC. B) are regulated under the Investment Company Act of 1940 with no SEC registration required. C) are nonregulated but still require SEC registration. D) are nonregulated with no Securities and Exchange Commission (SEC) registration required.

Are nonregulated with no Securities and Exchange Commission (SEC) registration required

Limited partnerships sold publicly via a prospectus offering would be expected to have A) a large group of investors, each contributing a large sum. B) a large group of investors, each contributing a small sum. C) a small group of investors, each contributing a large sum. D) a small group of investors, each contributing a small sum.

A Large group of investors, each contributing a small sum

Intangible drilling costs (IDCs) associated with oil and gas DPPs can generally A) be deducted completely in the first year of the program. B) not be deducted until the end of the programs life. C) not be deducted at all. D) be deducted up to a certain percentage in the earlier years of the program.

Be deducted completely in the first year of the program

A tax benefit reflecting the decreasing supply of oil or gas (or any other natural resource or mineral) after it is taken and sold

Depletion Allowance

Tangible drilling costs such as equipment, can be ________________ and written off over the _______________ of the program

Depreciated, Life

Shares in REITs are _________________ securities.

Equity

REITs that typically hold commercial property rather than residential property

Equity REITs

REIT shares can trade on _______________ or ___________

Exchanges, OTC

At the time of a limited partnership's dissolution, who is the last to be paid? A) Limited partners B) General lenders (creditors) C) Secured lenders (creditors) D) General partners

General Partners

When a limited partnership (LP) is dissolved, the ___________________ __________________ are paid last

General Partners

Direct participation programs (DPPs) are set up A) to be taxed directly, much like corporations are taxed. B) to pass on taxable income only to the investors, but not losses. C) as tax-free investments with no potential write-offs. D) having the owners of the business liable for any taxes due.

Having the owners of the business liable for any taxes due

Regarding oil and gas DPPs, tangible drilling costs are associated with items that I. have no salvage value at the end of the program. II. have some salvage value at the end of the program. III. can be depreciated. IV. cannot be depreciated. A) II & III B) I & IV C) I & III D) II & IV

II & III

Which of the following statements regarding real estate investment trusts (REITs) are true? I. Hybrid REITs invest in both commercial property and residential property. II. Some REITs hold no real property but hold mortgages on commercial property instead. III. Hybrid REITs can hold only residential property and mortgages on residential property. IV. REITs can pay dividends to shareholders and make capital gains distributions.

II & IV

REITS, organized as trusts, are not ____________________ _______________________

Investment Companies

REITs are not what?

Investment Companies

All of the following regarding a trust set up for the purpose of holding commercial property, or mortgages on commercial property, are true except A) gains can pass through to the owners of these shares. B) investors may never purchase shares in these trusts on an exchange or over-the-counter (OTC). C) these investments could not be considered open- or closed-end funds. D) ownership of these shares may provide for the receipt of dividends.

Investors may never purchase shares in these trusts on an exchange or over the counter

All of the following is true about local government investment pools (LGIPs) except A) pools are not required to register with the Securities and Exchange Commission (SEC). B) the pool maintains a fixed $1 net asset value. C) investors must be provided a prospectus at or before they purchase shares in the investment portfolio. D) LGIPs operate similarly to a money market instrument.

Investors must be provided a prospectus at or before they purchase shares in the investment portfolio

At the time of dissolution, which of the following regarding a limited partnership is true? A) Limited partners are paid after general partners. B) Limited and general partners are paid after the IRS. C) Limited and general partners are paid concurrently. D) Limited partners are paid before general partners.

Limited partners are paid before general partners

An example of securities that are established by states to provide other government entities such as cities, towns, school districts or state agencies with a short-term investment vehicle to invest funds include A) money market instruments. B) bond anticipation notes (BANs). C) tax anticipation notes (TANs). D) local government investment pools (LGIPS).

Local Government Investment Pools

Established by states to provide other government entities within its borders such as cities, counties, school districts or other state agencies with a short-term investment vehicle to invest funds

Local Government Investment Pools

What do LGIPS stand for?

Local Government Investment Pools

While there can be limited and rare exceptions, mutual funds are prohibited from purchasing securities on __________________ and selling securities _______________

Margin, Short

The operating characteristics of LGIPs are similar to those of ______________ _______________ funds, and they keep a $______ net asset value (NAV)

Money Market, 1

For real estate program partners, tax deductions will be derived from A) mortgage interest paid and depreciation. B) income received for rents. C) government-assisted housing allowances. D) historic rehabilitation credits received.

Mortgage Interest Paid and Depreciation

Deductions for real estate programs come primarily from __________________ __________________ paid on the properties and the ________________________ allowable for the properties.

Mortgage Interest, Depreciation

REITs that hold mortgages on commercial property

Mortgage REITs

For real estate program partners, tax deductions will be derived from A) government-assisted housing allowances. B) income received for rents. C) historic rehabilitation credits received. D) mortgage interest paid and depreciation.

Mortgage interest paid and depreciation

A document similar to a prospectus used in the sale of municipal securities

Offering Circular

Section 529 plans are considered municipal fund securities. They must therefore be sold by A) prospectus. B) security memo. C) investment letter. D) offering circular.

Offering Circular

Deductions for depletion would most likely apply to which of the following direct participation programs (DPP)? A) Equipment leasing program B) Oil and gas exploratory program C) Real estate limited partnership D) Oil and gas income program

Oil and Gas Income Program

How often may funds be rolled over from one state's Section 529 plan to another's? A) No more than twice per calendar year B) Once per semester C) Once every 12 months D) As often as necessary

Once every 12 months

DPPs are not taxed directly as a corporation would be. Instead, the income or losses from the business are passed directly through to the ___________________ of the __________________.

Owners, Partnership

In an LP, all tax consequences are passed on to the ________________

Partners

Real estate investment trusts (REITs) A) pay dividends but do not allow for the pass through of gains or losses. B) pass through losses only to investors but not gains. C) pay dividends and pass gains through to investors but not losses. D) pay interest payments to investors and pass through all gains or losses.

Pay dividends and pass gains through to investors but not losses

Which of the following characteristics are typical of an exchange-traded product (ETP)? A) The value of an ETP is derived from other investment instruments, and it trades on a national securities exchange. B) An ETP is an ineligible investment for retail customers, and may not be purchased on margin. C) The value of an ETP is derived by formula disclosed in the prospectus and it trades on an exchange only after normal trading hours. D) An ETP is marginable but may not be sold short.

The value of an ETP is derived from other instruments, and it trades on a national securities exchange

All of the following are true of REITs except A) they can be registered under subchapter M. B) they are registered as investment companies. C) they can pass through gains but not losses. D) listed REITS are liquid investments.

They are registered as Investment Companies

Regarding the decision to dissolve a LP before its scheduled predetermined dissolution date, it would need to be A) made by the general partner with the largest capital contribution with no vote required. B) ratified by the IRS because of the tax implications to dissolve earlier than planned. C) voted on by the general partner(s) only. D) voted on by the limited partners holding a majority interest.

Voted on by the limited partners holding a majority interest