Strategy and Recommendations

Which of the following statements regarding participant loans in a 401(k) plan are correct? -The maximum allowable loan amount is the lesser of $50,000 or 50% of the participant's vested account balance. -Unless the loan is taken out for the purpose of a mortgage on the participant's principal residence, repayment must be completed within 60 months of obtaining the loan. -Payback of the loan will be through payroll deduction. -Default on the loan will result in the IRS treating the loan as a distribution.

-The maximum allowable loan amount is the lesser of $50,000 or 50% of the participant's vested account balance. -Unless the loan is taken out for the purpose of a mortgage on the participant's principal residence, repayment must be completed within 60 months of obtaining the loan. -Payback of the loan will be through payroll deduction. -Default on the loan will result in the IRS treating the loan as a distribution.

An investment adviser representative is meeting with a potential advisory client. Among the items of information the IAR needs to obtain in order to develop the proper plan are the prospect's: 1. anticipated number of years until retirement. 2. location of current bank and brokerage accounts. 3. current savings and investments. 4. college alma mater.

1. anticipated number of years until retirement. 3. current savings and investments.

Ways in which a Section 529 Plan differs from a Coverdell ESA include: tax-free distributions when the funds are used for qualifying educational expenses . higher contribution limits. no earnings limitations. contributions that may be made by someone other than a parent or legal guardian.

A) II and III.

Wade Kimmons purchased 200 shares of ABC common stock on March 9, 2009, paying $32 per share. Since the date of the purchase, Mr. Kimmons has received $518 in dividends. With the stock selling for $89 per share on July 27, 2016, Wade gives all 200 shares to his niece, Kendra. One week later, Kendra sells all of the ABC stock for $85 per share. The tax consequences of this are A) long-term capital gain of $10,600 B) long-term capital loss of $800 C) short-term capital loss of $800 D) long-term capital gain of $11,118

A) long-term capital gain of $10,600

If ABC Fund pays regular dividends, offers a high degree of safety of principal, and appeals especially to investors seeking tax advantages, ABC is a(n) A) municipal bond fund B) corporate bond fund C) aggressive growth fund D) money market fund

A) municipal bond fund

The type of trust created in the grantor's will is a A) testamentary trust B) living trust C) limited trust D) beneficiary trust

A) testamentary trust

Your client opened a Roth IRA last year at your firm and opened another one 7 years ago at another broker-dealer. The Roth IRA at your firm has a cost basis of $5,500 and is currently worth $6,000. The other Roth IRA has a cost basis of $36,000 and is currently valued at $26,000. Your client asks you to explain what needs to be done to receive some tax benefit from the unrealized loss. How would you respond? A) The old Roth IRA must be closed, and the $10,000 loss may be claimed as an itemized miscellaneous deduction subject to the 2% floor. B) Both Roth IRAs must be closed, resulting in a loss of $9,500, which may be claimed as an itemized miscellaneous deduction subject to the 2% floor. C) Because all earnings in a Roth IRA are tax-free when withdrawals are qualified, losses cannot be deducted under any circumstances. D) The old Roth IRA must be closed, and the $10,000 long-term capital loss may be used to offset any gains or up to $3,000 in income.

B) Both Roth IRAs must be closed, resulting in a loss of $9,500, which may be claimed as an itemized miscellaneous deduction subject to the 2% floor.

A "margin account" is a type of brokerage account in which the broker-dealer lends the investor cash to purchase securities using marginable securities in the account as collateral. Which of the account documents authorizes the use of those securities as collateral for that loan? A) The hypothecation agreement B) The credit agreement C) The loan consent agreement D) The secured agreement

B) The credit agreement

The concept of creating a model portfolio, through asset allocation principles, that both increases return and reduces risk is known as: A) rebalancing. B) portfolio optimization. C) corrective adaptation. D) risk reduction fundamentals.

B) portfolio optimization.

Which of the following statements regarding the alternative minimum tax is TRUE? A) The lesser of the regular tax or the alternative tax is paid. B) The alternative minimum tax is added to the regular tax. C) The excess of the alternative tax over the regular tax is added to the regular tax. D) The tax bracket will determine whether the regular tax or the alternative tax is paid.

C) The excess of the alternative tax over the regular tax is added to the regular tax.

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

C) draft tax and estate documents to ensure compliance with current law to provide substantial after-tax returns

Probably the most significant benefit of saving for retirement using a Roth IRA is: A) tax-deductible contributions. B) tax-deferred accumulation. C) tax-free treatment at withdrawal. D) larger contributions than a traditional IRA.

C) tax-free treatment at withdrawal

A complex trust has the following income for the year: $1,500 in taxable interest, $2,000 in dividends (reinvested in the stock), and $3,000 in tax-exempt interest. In addition, the portfolio realized $3,500 in capital gains that were reinvested in the corpus. What is the distributable net income (DNI) for the trust?

C) $6,500

An investment adviser representative offers comprehensive financial planning services for women. Included in the planning are wills, trusts, and life insurance needs. For which of the following clients would term life insurance be most appropriate for meeting their needs? A) A 35-year-old married to a rock star. B) The 60-year-old widow of the CEO of a large corporation. C) A 75-year-old who has been married to the same man for 53 years. D) A 30-year-old mother of twins.

D) A 30-year-old mother of twins.

The type of trust created by a will that becomes operative at death is a: A) living trust. B) Q-tip trust. C) revocable trust. D) testamentary trust.

D) testamentary trust

If three individuals have a tenants in common account with your firm and one individual dies, then A) trading is discontinued until the executor names a replacement for the deceased B) the account must be liquidated and the proceeds split evenly between the two survivors and the decedent's estate C) the account is converted to joint tenants with rights of survivorship D) the two survivors continue as co-tenants with the decedent's estate

D) the two survivors continue as co-tenants with the decedent's estate