Book 3

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A NASDAQ stock is quoted at $34 Bid / $35 Ask. A trader that places a buy order will most likely be filled at: A. $35 B. $34 1/2 C. $34 D. $33 1/2

A customer approaches your firm, stating that he wishes to fund his 3 year old son's future college education. He states that he wants to maximize his contributions, minimize taxes, and maintain complete control over the account. Based on these objectives, the best recommendation is a: A. 529 college savings plan B. 529 prepaid tuition plan C. UGMA account D. Coverdell ESA

A customer buys $23,000 of ABC stock in March of 20XX. On December 31, 20XX, the stock is valued at $20,000. The customer will be able to deduct how much on this year's tax return? A. 0 B. $1,500 C. $3,000 D. $6,000

A customer has $10,000 in passive losses from a limited partnership investment. If the customer has no other passive income for that tax year, the customer may deduct: A. 0 B. $3,000 C. $5,000 D. $10,000

A customer has $20,000 to invest, but needs immediate access to the funds to pay a variety of bills that will arrive over the next 3 months. The BEST recommendation is for the customer to deposit the funds to a: A. Money market checking account B. Money market mutual fund C. Money market instrument D. Treasury Direct account

A customer in the 28% tax bracket has $6,000 of capital gains and $9,000 of capital losses. How much unused loss is carried forward to the next tax year? A. 0 B. $3,000 C. $6,000 D. $9,000

A customer in the 35% tax bracket has $6,000 of capital gains and $10,000 of capital losses. How much loss is deductible from this year's tax return? A. $3,000 B. $4,000 C. $6,000 D. $10,000

A customer owns 200 shares of ABC, purchased 2 years ago at $50 per share. The current market value of ABC stock is $80 per share. If the customer gifts the stock to his son, the result is: I The donor may have gift tax liability II The recipient may have gift tax liability III The cost basis to the gift recipient is $50 per share IV The cost basis to the gift recipient is $80 per share A. I and III B. I and IV C. II and III D. II and IV

A manager of a small cap portfolio wishes to use an index to establish a benchmark rate of return. The most appropriate index to use is the: A. Russell 2000 Index B. Standard and Poor's 400 Index C. Dow Jones Industrial Average D. NASDAQ 100 Index

A married couple has a combined net worth of $10,000,000. If one dies in 2020, the taxable amount of the estate to the surviving spouse is: A. 0 B. $500,000 C. $5,000,000 D. $10,000,000

A married couple that is in the maximum tax bracket has 1 child, age 13. The couple is looking to start a 529 plan to fund the child's college education beginning 5 years from now. To calculate the amount of money needed to pay for college, all of the following are needed EXCEPT: A. parent's income B. current cost of tuition C. assumed rate of return D. expected inflation rate

A person who makes a secondary market in securities is called a(n): A. market maker B. registered representative C. underwriter D. retail broker

A portfolio manager generates a 15% rate of return on an "aggressive growth" portfolio compared to a 13% rate of return on the benchmark portfolio and a 10% rate of return on the Standard and Poor's 500 index over the same period. The manager's active rate of return is: (return above the passive) A. 2% B. 3% C. 5% D. 15%

A privately-held company offers a 401(k) plan to its employees. The average age of the employees is 29 and the plan offers 10 different equity strategies. According to the Employee Retirement Income Security Act of 1974, Rule 404(c), the plan MUST be amended to: A. include at least 1 of the existing equity funds in addition to a fixed income fund and a capital preservation fund B. give the company's employees an investment option consisting of that company's publicly traded stock C. allow the company's employees to rebalance their portfolios at least monthly D. provide tax advice to any employee that makes an investment into the 401(k) plan

A retired customer that has a portfolio of blue chip stocks is looking to supplement his retirement income. An appropriate recommendation would be to: A. sell covered calls B. sell naked calls C. sell covered puts D. sell naked puts

A retirement plan would invest in all of the following securities EXCEPT: A. Tax Free Municipal Bonds B. U.S. Government Bonds C. Equities D. Corporate Bonds

A security that is priced at equilibrium would tend to: I be stable in priceII be volatile in priceIII have lower transaction costsIV have higher transaction costs A. I and III B. I and IV C. II and III D. II and IV

A socially responsible customer would NOT invest in a(n): A. defense company B. food company C. drug company D. computer company

A sole proprietor has applied for and acts under a DBA. Under federal law, the tax return that must be filed is a(n): I individual return Form 1040 II partnership return Form 1065 III with Schedule C attached IV with Schedule E attached A. I and III B. I and IV C. II and III D. II and IV

A younger female customer, in the highest tax bracket, already has a substantial investment portfolio that is invested in a balance of quality stocks and bonds. She wants an investment that will provide rapid asset growth and is willing to assume risk. The BEST recommendation would be: A. Emerging markets fund B. Single stock C. Municipal bond D. Index fund

All of the following are acceptable investments in an Individual Retirement Account EXCEPT: A. Municipal Bonds B. U.S. Minted Gold Coins C. Common Stocks D. Common Stock Options

All of the following can establish a 403(b) plan EXCEPT a public: A. corporation B. university C. hospital D. school system

All of the following statements concerning a 403(b) plan are correct EXCEPT: A. contributions are determined by the employer's level of profits B. the plan may provide only for employee contributions C. employee contributions may be matched by employer contributions D. contributions may be invested in mutual funds or annuities

All of the following statements concerning dollar cost averaging (DCA) are correct EXCEPT: A. DCA reduces the cost of purchasing shares below current market price B. the investor using DCA makes no attempt to adjust the amounts of investment by market trends C. an investor using DCA makes fixed dollar investments at regular intervals D. an investor using DCA will buy fewer shares when the price of shares is high

An individual buys stock from a distant family member for $2,000. The family member paid $1,000 for the stock and held it for many years before selling it. A short while later, the same individual inherits $3,000 of the same stock. 6 months later the stock has doubled in value, and the individual sells all the shares. The tax consequence is: A. $2, 000 short-term capital gain; $3,000 long-term capital gain B. $2,000 long-term capital gain; $3,000 short-term capital gain C. $5,000 short-term capital gain D. $5,000 long-term capital gain

An individual client purchased his residence 5 years ago for $300,000. For 3 of the last 5 years, the client rented out the property for income, and lived in the house of 2 of those years. The client sells the house for $500,000. How much of the gain is taxable? A. 0 B. $100,000 C. $150,000 D. $200,000

An individual owns a Traditional IRA from which she has never taken a distribution. Her 70th birthday falls on June 30, 2020. Her first distribution must be taken no later than A. April 1st of 2021 B. April 1st of 2022 C. June 30th of 2023 D. June 30th of 2024

An individual that has not reached retirement age that has an IRA account dies, splitting the estate equally between his wife and his 2 sons. The wife is age 60, one son is age 35 and the other son is age 30. Distribution of the assets in the account is based on the life expectancy of the: A. wife B. 35 year old son C. 30 year old son D. the average of the life expectancies of the 3 beneficiaries

Index fund managers: A. attempt to exactly match the investment performance of the securities that comprise the index B. attempt to exceed the investment performance of the securities that comprise the index C. have a problem with exactly tracking the index because the companies in the index may change D. have a problem with selecting the weighting of securities to be purchased since the creator of the index does not disclose this information

Investor likes and dislikes that must be taken into account when making a recommendation to a customer is an example of: A. financial considerations B. non-financial considerations C. investment horizon D. investment style

On December 10th, 2020, a mother gives a gift to her daughter of 1,000 shares of ABC stock. The stock was purchased 16 months earlier at a cost basis per share of $51 per share. The market value at the date of the gift was $64 per share. On January 18th, 2021, the mother dies and bequeaths 1,000 shares of XYZ to the daughter. The market value of XYZ at the date of death is $44 per share and the shares were purchased 2 months earlier by the mother at $40 per share. On February 1st, 2021, the daughter sells the ABC stock at $75 per share and sells the XYZ stock at $48 per share. The tax consequence to the daughter upon selling ABC and XYZ is: A. no capital gain or loss B. $24 per share long term capital gain on ABC; $4 per share long term capital gain on XYZ C. $11 per share long term capital gain on ABC; $8 per share short term capital gain on XYZ D. $24 per share short term capital gain on ABC; $8 per share short term capital gain on XYZ

Over a period of time, a portfolio needs to be "rebalanced." This means that: A. the percentages assigned to each asset class must be strategically reset based on the relative performance of each asset class B. securities must be bought and sold to maintain the asset allocation at the initial percentage targets C. securities must be bought and sold to take advantage of market price fluctuations D. the portfolio must be liquidated and the proceeds reinvested with another independent investment adviser

Pension funds are prohibited from using which investment strategy? A. Purchase government and agency securities B. Sell short government and agency securities C. Sell covered call contracts D. Buy puts on stock positions

Regulation T controls credit on securities from: A. broker to broker B. broker to customer C. bank to broker D. bank to customer

Section 529 plans are used to fund: A. retirement needs B. higher education needs C. medical needs D. disability needs

The Investment Policy Statement would include the: A. investment adviser's mission statement B. customer investment objectives and goals C. investment adviser's compensation terms D. portfolio review procedures and intervals

The Second Market is trading of: A. listed securities on an exchange floor B. unlisted securities "over-the-counter" C. listed securities "over-the-counter" D. securities directly between institutions

The advantage of buying a foreign index fund as compared to direct investing in foreign stocks is that it: A. minimizes the risk of changing currency values B. is easier than individually investing in foreign stocks C. reduces tax liability when dividends are distributed D. minimizes the business risk of the investments

The assets in a Coverdell Education Savings Account may be used to pay all of the following expenses EXCEPT: A. tuition at a private high school B. private music lessons C. tuition at a religious elementary school D. tuition at a public university

The maximum permitted annual contribution to a Coverdell Education Savings Account for a single beneficiary is: A. $2,000 in a single account B. $2,000 total in any number of accounts C. $4,000 in a single account D. $4,000 total in any number of accounts

The portfolio management technique that uses a market index as a performance benchmark that the asset manager must EXCEED is called: A. Passive asset management B. Active asset management C. Strategic asset management D. Tactical asset management

The term "marriage penalty" refers to the: A. reduced estate tax exclusion for married couples B. higher tax rates applied to higher joint reported income C. lower income exemptions for married couples D. alternative minimum tax that applies to couples filing jointly

Under the provisions of ERISA (Employee Retirement Income Security Act), the use of index options is: A. prohibited because of the speculative nature of these instruments B. allowed only if the strategies followed are in compliance with the objectives and restrictions of the plan C. allowed only if the plan trustee maintains physical possession of the underlying securities D. allowed without restriction as long as the investment manager acts in a prudent manner

What options are available for a Coverdell Education Savings Account that is not used by the time the beneficiary is age 30? I The account balance is distributed tax-free to the educational institution selected by the beneficiary II The account balance is distributed to the beneficiary and distributions are taxed to the beneficiary III The account balance is rolled over to a family member who is under 30 years of age IV The account balance is rolled over to an IRA for the beneficiary A. I and II only B. II and III only C. II and IV only D. III and IV only

What portfolio construction is most appropriate for a retired school teacher who is age 60? A. 100% common stocks B. 40% common stock / 60% bonds C. 60% common stock / 40% bonds D. 100% bonds

What type of joint account can only be opened by married couples? A. Joint Tenants With Rights of Survivorship B. Tenants By Entireties C. Tenants In Common D. Any of the above

When performing a suitability determination, the customer informs you that she will not invest in any companies that produce or market tobacco or alcohol products. This is an example of: A. faith-based investing B. non-financial considerations C. investment strategy D. personal customer profiling

Which first market does NOT trade futures contracts? A. NYMEX B. NYSE C. CBOT D. CME

Which of the following are needed to determine tax filing status? I Marital status on the last day of the year II Nationality III Residency IV Cost of home upkeep A. I and III B. I and IV C. II and III D. II and IV

Which of the following are taxable in the year of receipt? I Interest earned from investments II Cash dividends from investments III Stock dividends from investments IV Stock splits on investments A. I only B. I and II C. III and IV D. I, II, III, IV

Which of the following business structures has unlimited liability? A. S corporation B. Sole proprietorship C. C corporation D. Limited liability company

Which of the following describes a transaction that occurred in the "Fourth Market"? A. The President of a listed company selling a large block of that company's stock B. A mutual fund buying shares of stock directly from an insurance company C. A dealer selling shares of stock through a broker's broker D. A company listing its shares directly after completing its Initial Public Offering

Which statement is TRUE regarding family limited partnerships? A. At least 1 parent and 1 child must be general partners in the venture B. The venture must have a legitimate business purpose other than tax avoidance C. Both the general partner(s) and limited partner(s) can assume a management role D. Only intangible financial assets can be held in the partnership

Which statement is TRUE regarding mutual fund distributions? A. All dividends distributed by the fund are taxable to the recipient at the same tax rate as for ordinary income B. All capital gains distributed by the fund are taxable to the recipient based on the fund's holding period, even if the recipient has held the shares for less than 1 year C. All distributions reported on Form 1099-DIV are excluded from tax if they are automatically reinvested D. All distributions from municipal bond funds are excluded from taxation because of the federal tax exemption applied to the underlying securities

Which statement is true regarding dollar cost averaging? A. If market prices remain constant, the plan will produce a lower average per share cost B. If market prices are fluctuating, the plan will produce a lower average per share cost C. If prices rise, smaller dollar purchases must be made; while if prices fall, larger dollar purchases must be made D. The plan requires that a constant dollar amount be maintained in equity securities, with any excess invested in debt

Which statements are TRUE about Coverdell Education Savings Accounts? I Contributions can continue until the beneficiary reaches age 18 II Contributions can continue until the beneficiary reaches age 30 III Distributions for the beneficiary must be completed upon reaching age 18 IV Distributions for the beneficiary must be completed upon reaching age 30 A. I and III B. I and IV C. II and III D. II and IV

Which statements are TRUE about IRA accounts? I Excess contributions are subject to a 6% penalty tax II Excess contributions are subject to a 10% penalty tax III Premature withdrawals are subject to a 6% penalty tax IV Premature withdrawals are subject to a 10% penalty tax A. I and III B. I and IV C. II and III D. II and IV

Which statements are TRUE regarding distributions from 457 plans? I Distributions taken at any age are subject to tax II Distributions taken at any age are tax free III Distributions taken prior to age 59 1/2 are subject to a 10% penalty tax IV Distributions taken prior to age 59 1/2 are not subject to a 10% penalty tax A. I and III B. I and IV C. II and III D. II and IV

Which statements are TRUE? I Strategic portfolio management establishes the basic portfolio structure II Tactical portfolio management establishes the basic portfolio structure III Strategic portfolio management allows market timing adjustments to portfolio structure IV Tactical portfolio management allows market timing adjustments to portfolio structure A. I and II B. I and IV C. II and III D. III and IV

A Registered Investment Adviser has a client with the following stock positions: Cost basis Current market value ABC$10,000 $40,000 DEF$15,000 $25,000 PDQ$28,000 $32,000 XYZ$20,000 $40,000 All of these positions have been held for over 1 year. The customer needs to liquidate $20,000 of securities and wishes to pay the lowest capital gains tax. What should the customer do? A. Sell $20,000 of ABC B. Sell $20,000 of DEF C. Sell $20,000 of PDQ D. Sell $20,000 of XYZ

A Registered Investment Adviser has been retained by a trustee to develop an investment plan for the trust. Such a plan would consider all of the following EXCEPT: A. inflation forecast B. investment objectives C. will for the trustee D. liquidity needs

A corporate investor may exclude from taxation, part of: I dividends received from common stock investments II dividends received from preferred stock investments III dividends received from convertible preferred stock investments IV interest received from convertible bond investments A. I and II only B. III and IV only C. I, II, III D. I, II, III, IV

A corporation buys the stock of another company. Which percentage of dividends received from the investment in the acquired company's shares are excluded from tax to the corporate purchaser of those shares? A. 0% b. 30% C. 50% d. 100%

A corporation that has a market capitalization of $4,000,000,000 would be an appropriate investment for a: A. Micro Cap Mutual Fund B. Small Cap Mutual Fund C. Mid Cap Mutual Fund D. Large Cap Mutual Fund

A new client with no other investment assets has just come into an inheritance of $500,000 of ABCD stock, a blue chip company listed on the NYSE. As the adviser to this customer, your IMMEDIATE concern should be: A. whether the company is a candidate for delisting B. the possibility that the value of ABCD stock may decline sharply C. the lack of diversification of the customer's investment D. whether the customer paid any estate tax liability due

A new customer calls a representative and says the following: "I own 1,000 shares of DEF stock, which is currently held at another broker-dealer. I want to sell the shares at the market." The representative accepts the order from the customer. The order ticket should be marked: A. long sale B. long sale - exempt C. short sale D. short sale - exempt

A nonqualified retirement plan that is established by a non-profit organization is a: A. 401(k) plan B. 403(b) plan C. 457 plan D. 529 plan

A person must begin to make withdrawals from an IRA: A. the day after reaching age 59 ½ B. 2 months after reaching age 70 ½ C. by April 1st of the year following the year the individual reaches age 70 ½ D. 9 months following the date the individual reaches age 70 ½

A portfolio invested in index funds that is rebalanced monthly is considered to be: A. Active/Active B. Passive/Passive C. Active/Passive D. Passive/Active

A portfolio manager generates a 10% rate of return on a "small cap" portfolio, compared to an 8% rate of return on the benchmark portfolio and a 6% rate of return on the Standard and Poor's 500 index over the same period. The passive rate of return on the portfolio is: A. 2% B. 6% C. 8% D. 10%

A portfolio manager generates a 20% rate of return on a "small cap" portfolio, compared to a 15% rate of return on the benchmark portfolio and a 10% rate of return on the Standard and Poor's 500 index over the same period. The passive rate of return on the portfolio is: A. 5% B. 10% C. 15% . 20%

A portfolio with an objective of global investing would: A. invest only in securities issued in foreign countries B. invest only in securities issued by U.S. corporations that have global operations C. spread its investments across both domestic and foreign securities, overweighting countries that are likely to experience faster rates of growth D. spread its investments across both domestic and foreign securities, weighting investments relative to the GDP of each country

A registered representative receives a telephone call from a customer who tells the representative to: "Sell my 500 shares of ABC stock at the market." The representative has the record of the customer purchasing the shares 2 years ago, but the shares were transferred into the customer's name and shipped to the customer at his home address. The representative asks the customer where the shares are and the customer responds as follows: "The shares are in a fireproof safe in my bedroom." The representative should: A. not accept the sell order because the stock is not in custody of the broker-dealer B. accept the sell order, but mark the order ticket short because the shares are not in custody of the broker-dealer C. accept the sell order, but mark the order ticket long because it can be reasonably expected that the customer will deliver the shares by settlement D. not accept the sell order because the stock is not in good deliverable form

A single 30-year old investor has no current investments and $20,000 in a savings account. The customer earns $150,000 per year and has discretionary investment funds of $25,000 per year. Which of the following is an appropriate asset allocation for this customer? A. 80% Aggressive Growth Fund, 20% Emerging Markets Fund B. 80% Emerging Markets Fund, 20% Aggressive Growth Fund C. 30% Aggressive Growth Fund, 30% Emerging Markets Fund, 30% Growth Fund, 10% Money Market Fund D. 30% Money Market Fund, 30% Treasury Securities Fund, 30% Blue Chip Stock Fund, 10% Aggressive Growth Fund

A student at a U.S. college wishes to spend her summer year abroad at the American University in Paris, France. Can her 529 plan be used to pay for tuition? A. No, because the funds can only be used to pay for college in the United States B. No, because the funds can only be paid for college courses that are taught in English C. Yes, as long as the American University in Paris is on the list of foreign schools that qualify for Title IV federal student aid D. Yes, because the funds can be used to pay for college or higher education in the United States or in any foreign institution

All of the following accounts avoid probate upon death of an owner EXCEPT: A. Totten trust B. JTWROS C. Tenants in Common D. Payable on Death

All of the following are characteristics of 529 college savings plans EXCEPT: A. a one-time single contribution of up to 5 times the annual gift tax exclusion may be contributed in a single year B. eligibility of contributions is not affected by the income of the contributor C. contributors purchase tuition credits or units D. the plans are sponsored by States

All of the following are included in the taxable income of a corporation EXCEPT: A. Dividends received from foreign investments B. Gain on the sale of a capital asset C. Proceeds received from the issuance of debt securities D. Interest received from domestic investments

All of the following persons can contribute to a 403(b) plan EXCEPT a: A. professor at a university B. nurse at a hospital C. student at a college D. secretary at a foundation

All of the following statements are true regarding defined benefit plans EXCEPT: A. contributions made to the plan can vary from year to year B. employees with the highest salaries and the fewest years to retirement benefit the most C. benefits paid to employees consists of a tax free return of capital and a taxable return of earnings D. actuarial tables are used to determine contribution rates for each employee

All of the following statements are true regarding stop orders EXCEPT stop orders: A. can protect a profit on a long stock position B. can limit a loss on a long stock position C. allow a specific execution price to be "locked-in" D. are placed "away" from the current market

All of the following terms are synonymous EXCEPT: A. agent B. broker .c dealer D. middleman

An IAR has been retained to manage the brokerage account of an estate. When examining the account statement, the IAR sees the following holdings: $9,000,000 ABC Corp. AA-rated long term bonds $1,000,000 XYZ Money Market Fund Over the past year, the ABC bond position has appreciated by 30% due to falling interest rates. The IAR notes that the yield curve has steepened its positive slope and believes that the Federal Reserve will start tightening credit to reduce the risk of inflation. The BEST action for the IAR to take is to: A. do nothing because the account assets must be distributed to the heirs within 9 months B. sell the appreciated bond position and reinvest the proceeds in a growth mutual fund C. sell the appreciated bond position and reinvest the proceeds in the money market fund D. either hold or sell the appreciated bond position using the prudent investor rule as a guideline

An IAR has constructed a buy and hold bond portfolio. The major factor to consider is: A. selecting bonds that will give superior performance B. making sure all of the bonds have the same maturity C. selecting bonds with high credit ratings D. choosing bonds with differing issuers

An Investment Adviser Representative (IAR) prepares a sophisticated investment strategy for a client. The IAR subsequently learns that the strategy will have severe tax consequences for the client. The IAR should: A. implement the plan and let the client's tax accountant deal with any tax issues B. implement the plan and recommend a tax professional to the client C. develop another plan for the client D. implement the plan only if the customer signs a waiver of liability

An Investment Adviser Representative takes an annual look at his client's portfolio holdings and reallocates them to match up to a previously determined strategic asset allocation percentage. This is known as: A. portfolio insurance B. portfolio optimization C. portfolio rebalancing D. portfolio tracking

If the beneficiary of a Coverdell Education Savings Account receives a full scholarship for education expenses, which statement concerning distributions is TRUE? A. The beneficiary can take distributions free of income tax and penalty tax B. Distributions to the beneficiary are subject to income tax and penalty tax C. Distributions to the beneficiary are subject to income tax but no penalty tax D. Distributions must be rolled over to a Traditional IRA or Roth IRA

In January, 20XX a customer buys 100 shares of ABC stock at $50 per share and pays a $2 commission per share. The customer receives $2 in cash dividends during the year. The customer's cost basis in the stock is: A. $48 per share B. $50 per share C. $52 per share D. $54 per share

Income in a non-revocable trust is taxed at the: A. corporate rate B. individual rate C. trust rate D. AMT rate

Limited partnerships MUST have at least: A. 2 Limited partners B. 2 General partners C. 1 General partner and 1 Limited partner D. 100 partners, in any combination of either Limited or General

Long Market Value: $62,000 Short Market Value: $30,000 Debit: $30,000 Credit: $50,000 SMA: $6,000 The equity in the account is: A. $6,000 B. $36,000 C. $52,000 D. $78,000 long and short accounts separately. Long Market ValueDebitEquity$62,000 -$30,000$ =32,000 CreditsShort Market ValueEquity$50,000$-30,000=$20,000

Many years ago, a customer bought 100 shares of ABC stock at $40. The customer gifts the stock to her son when it is valued at $50. The son sells the security at $55. The tax consequence to the son is: A. no capital gain or loss B. $10 per share capital gain C. $15 per share capital gain D. $55 per share capital gain

Money purchase retirement plans limit the maximum annual contribution in 2020 to: (erisa) A. $19,500 B. $6,000 plus an extra $1,000 catch up contribution for individuals age 50 or older C. 25% of income, capped at a maximum of $57,000 D. $2,000 per year per individual

What will happen to a Coverdell Education Savings Account if the beneficiary does not use it? A. The amount in the account is forfeited B. The amount in the account is returned to those who contributed C. The amount in the account is distributed to the beneficiary and taxed to the beneficiary D. The amount in the account is distributed to the parents of the beneficiary and taxed to them

When looking at index funds, what is the "benchmark measure"? A. Alpha B. Beta C. Comparable index D. Active return

Which of the following MUST act in a fiduciary capacity? I Securities agent II Investment adviser representative III Executor of an estate IV Settlor of a pension plan A. I and II only B. III and IV only C. II and III only D. I, II, III, IV

Which of the following accounts avoid probate upon death of an owner? I Totten trust II JTWROS III Transfer On Death IV Tenants in Common A. I and II only B. III and IV only C. I, II, III D. I, II, III, IV

Which of the following are "asset classes"? I Jewelry II Collectibles III Real Estate IV Life Insurance A. I and III B. I and IV C. II and III D. II and IV

Which of the following are advantages of "DRIPs"? I Additional shares of the issuer are purchased with no commission charges II The investor gets to decide the timing of additional stock purchases in that issuer III The investor can add to an existing position in that issuer without having to place an order through a broker IV The process of buying additional shares via a DRIP allows for dollar cost averaging A. I and II only B. III and IV only C. I, III, IV D. I, II, III, IV

Which of the following information is on an order ticket? I Order size II Duration of order III Price of the transaction if it is a market order IV Name of security A. I and IV only B. II and III only C. I, II, IV D. I, II, III, IV

Which of the following investments are permitted for 403(b) plans? I Corporate common stocks II Certificates of deposit III Fixed annuities IV Variable annuities A. I and IV only B. II and III only C. III and IV only D. I, II, III, IV

Which of the following is NOT a portfolio management "style?" A. Active management B. Passive management C. Diversification D. Indexing

Which of the following is a First Market? A. Pink OTC Markets trading B. Primary Market offerings of new issues C. New York Stock Exchange trading D. Trading of U.S. Government securities

Which of the following is a capital need for a medical student? A. Paying off student loans B. Setting aside money to pay for medical school tuition C. Buying medical imaging equipment 5 years from now D. Borrowing money to pay for living expense while in school

Which of the following securities are actively traded in the secondary market? I Open end funds II Closed end funds III Real estate investment trusts IV Direct participation programs A. I and II B. III and IV C. II and III D. I, II, III, IV

Which of the following securities are traded in the secondary market? I Preferred Stocks II American Depositary Receipts III Mutual Funds IV Municipal Bonds A. I and II only B. III and IV only C. I, II and IV D. I, II, III, IV

Which statements are TRUE about asset classes and investment time horizons? I Equity investments are the better choice for short term time horizons II Interest bearing investments are the better choice for short term time horizons III Equity investments are the better choice for long term time horizons IV Interest bearing investments are the better choice for long term time horizons A. I and III B. I and IV C. II and III D. II and IV

Which statements are TRUE? I The penalty for a premature distribution from an Individual Retirement Account is 6% II The penalty for a premature distribution from an Individual Retirement Account is 10% III The penalty for an excess contribution to an Individual Retirement Account is 6% IV The penalty for an excess contribution to an Individual Retirement Account is 10% A. I and III B. I and IV C. II and III D. II and IV

Which transaction can ONLY be done in a margin account? A. Purchase of stock B. Long sale of stock C. Short sale of stock D. Purchase of an option

Who contributes assets into a trust? A. Trustee B. Custodian C. Grantor D. Beneficiary

A 40-year old man wishes to remove funds from his IRA to buy his child an automobile for commuting to work after school. The customer has: A. no tax liability B. regular income tax liability only on the amount withdrawn C. 10% penalty tax only on the amount withdrawn D. both regular income tax liability and 10% penalty tax on the amount withdrawn

A Registered Investment Adviser (RIA) has managed $5,000,000 of a customer's funds successfully for many years. The customer asks the RIA to prepare a revocable trust for his children and tells the RIA to transfer $2,000,000 of his funds into the trust and trade the new account in the same manner as the existing account. The RIA should: A. open the account and begin trading B. tell the customer to contact a tax specialist C. explain to the customer that revocable trusts cannot be traded D. refer the client to an attorney that can set up the trust

A business entity that has the legal protections of a corporation and the tax benefits of a partnership is a: A. general partnership B. limited partnership C. C Corporation D. S Corporation

A couple has been recently married, both for the second time. They are both age 40, and each has 2 kids from their prior marriage. They want to open a brokerage account that will ensure that the kids get assets from their natural parent. In order to accomplish this, the account should be opened as a: A. Totten Trust B. Partnership C. Joint Account With Rights Of Survivorship D. Joint Account With Tenants In Common

A customer has purchased 1,000 shares of ABC stock at $44 per share, paying a commission of $1.00 per share for the transaction. ABC stock declares a 20% stock dividend. When the dividend is paid, the tax status of the investment is: A. 1,000 shares held at a cost basis of $44 per share B. 1,000 shares held at a cost basis of $45 per share C. 1,200 shares held at a cost basis of $36.66 per share D. 1,200 shares held at a cost basis of $37.50 per share

A customer purchases securities on April 30th, 2020. The securities appreciate and the customer wants to donate the securities to get a tax deduction. The customer will be able to deduct the full market value without incurring any other taxes if the securities are donated on: (over a year not a year) A. October 30th, 2020 B. April 29th, 2021 C. April 30th, 2021 D. May 1st, 2021

A father gives a $22,000 gift of securities to his son; and a $22,000 gift of securities to his daughter. Which statement is TRUE? A. The father has no gift tax liability B. The father has gift tax liability on the gift to the son C. The father has gift tax liability on the gift to the daughter D. The father has gift tax liability on both gifts

A grandmother purchased 100 shares of ABC stock for $1,000. She gifts it to her granddaughter when the stock is worth $3,000. 2 years later, the granddaughter sells the stock for $5,000. What is the tax consequence when the granddaughter sells the stock? A. $2,000 Short Term Capital Gain B. $2,000 Long Term Capital Gain C. $4,000 Short Term Capital Gain D. $4,000 Long Term Capital Gain

A husband and wife have a joint brokerage account with your firm. The husband calls up and directs the agent to sell 100 shares of DEF from the account. Which statement is TRUE about accepting this order? A. The order cannot be accepted because it must be placed in writing B. The order cannot be accepted unless approval of the spouse is obtained C. The order cannot be accepted unless the husband has been granted a power of attorney by the wife D. The order can be accepted as given

A husband and wife hold a joint account at your firm with rights of survivorship. The husband manages the account, places orders, monitors account activity, and monitors account performance. The wife is not involved at all. The husband dies. What should representative do? A. Close the account B. Freeze the account C. Talk to the estate attorney D. Talk to the wife

A married couple, ages 30 and 31, wish to start investing for their retirement at age 55. They have 2 children, ages 3 and 1, that they expect to send to college. What is the time horizon that should be used for their retirement portfolio? A. 15 years B. 20 years C. 25 years D. 40+ years

A money manager that employs momentum investing makes investment decisions based on the: A. fundamental values B. earnings growth of the company C. efficient market theory D. earnings trends of the company

A mutual fund is owned in a qualified retirement account. Dividends paid by the mutual fund will be taxable: A. annually B. if they are not automatically reinvested in additional fund shares C. if they are automatically reinvested in additional fund shares . if they are taken as a distribution from the account

A sole proprietor, 60 years old, has been in business for many years and the business is doing very well. He would like to retire at age 70. He asks his IAR about the potential benefit of changing the business structure to a C Corporation or a General Partnership. In terms of a business advantage, the IAR could tell the sole proprietor that: A. corporate dividends are not taxed until retirement B. partnerships have an unlimited life C. ownership in a corporation can be transferred upon retirement D. corporate ownership will provide the owner with limited liability

A teacher contributed to a 403(b) annuity contract over the past 12 years. The contributions over this period totaled $10,000 and the current market value of the contract is $16,000. If the teacher takes a lump-sum withdrawal at retirement, the taxable amount is: A. $6,000 B. $8,000 C. $10,000 D. $16,000

A working couple has a combined income of $150,000. Neither is covered by an employer sponsored pension plan. Which statement is TRUE about IRA contributions by these persons? A. IRA contributions are prohibited since these persons can be covered by an employer sponsored plan B. IRA contributions are prohibited since these persons' income exceeds allowed limits C. IRA contributions are permitted; however the contribution amount is not deductible D. IRA contributions are permitted with the contribution amount being tax deductible

All of the following are contrarian economic indicators EXCEPT: A. odd lot sales and purchases B. short interest level C. put/call ratio D. price/earnings ratio

All of the following are deductible from a taxable estate EXCEPT: A. Funeral and estate administrative expenses B. Claims against the estate and mortgages against real property owned by the estate C. State death tax liability D. The difference between cost basis and fair market value for depreciated assets owned by the estate

All of the following are defined as "portfolio income" under IRS guidelines EXCEPT: A. Dividends received from common stock holdings B. Interest income received from bond holdings C. Proceeds from the sale of securities in excess of the tax basis of those securities D. Royalties received from oil and gas limited partnership holdings

All of the following are objectives that a capital needs analysis would attempt to address EXCEPT: A. paying for a child's college 15 years from now B. the maturing of a medical resident's balloon loan 10 years from now C. having funds 20 years from now to enjoy a comfortable retirement D. borrowing 5 years from now using a home equity line to make a major home improvement

All of the following are settlor functions in a pension plan established under ERISA EXCEPT: A. choosing the type of plan B. amending or changing plan options C. terminating a plan D. choosing plan investments

All of the following are types of joint accounts EXCEPT: A. Tenancy in Common account B. Joint Tenants with Rights of Survivorship account C. Tenants by Entireties account D. Omnibus account

All of the following statements are true about estate or gift tax due EXCEPT: A. the amount of tax due is based on the size of the gift or estate B. the larger the size of the gift or estate, the higher the tax rate C. a lifetime unified credit is applied against any tax due D. gifts or bequests made by an individual under age 59½ are subject to a penalty tax

All of the following statements are true regarding family limited partnerships EXCEPT: A. the venture must have a legitimate business purpose other than tax avoidance B. the partnership must have at least 1 general partner and 1 limited partner C. only general partners can assume a management role D. only securitized assets can be held as investments(any asset can be held)

An Investment Adviser Representative (IAR) has a new single client who wishes to retire early. Outside of the client's current financial status, which of the following information should the IAR obtain from the client? I The number of years until retirement II Other sources of income the client will have after retirement III Whether the client has a pension benefit and what this amount will be IV What type of lifestyle the customer wishes to live in retirement A. I and II B. III and IV C. I, II, III D. I, II, III, IV

An individual who is covered by another qualified retirement plan is permitted to contribute to a(n):(only thing that stops you is high income) I IRA II Roth IRA III Coverdell Education Savings Account A. I only B. I and II only C. II and III only D. I, II, III

An investment policy statement would NOT include: A. recommended allocations among differing asset classes B. expected returns of the recommended strategy and the expected range of these returns C. strategies used for selecting specific stocks in the equity portion of the portfolio D. disclosure of the fees that the adviser will earn for implementing the recommended strategy

An investor buys stock on January 1st for $100 and sells it 1 1/2 years later on July 1st for $90. The investor has a: A. short term capital gain B. short term capital loss C. long term capital gain D. long term capital loss

An older female customer, in the lowest tax bracket, wants an investment that will provide asset growth for retirement. The BEST recommendation would be: A. Emerging markets fund B. Single stock C. Municipal bond D. Index fund

Coverdell savings accounts permit a donor to make: A. tax-deductible contributions for a beneficiary to pay for higher education expenses only B. non tax-deductible contributions for a beneficiary to pay for higher education expenses only C. tax-deductible contributions for a beneficiary to pay for education expenses at all levels D. non tax-deductible contributions for a beneficiary to pay for education expenses at all levels

For a family limited partnership account, who gets the termination benefits? A. Grantor B. Trustee C. Income beneficiary D. Remainder beneficiary

For any one year, what is the maximum amount that parents can contribute to a 529 plan for a child without incurring gift tax liability in 2020? (multiplier rule) A. $10,000 B. $15,000 C. $55,000 D. $150,000

If a customer has a gain on a short stock position that he wishes to protect, which of the following statements are TRUE? I The order will be placed below the current market price II The order will be placed above the current market price III A buy limit order will be entered IV A buy stop order will be entered A. I and III B. I and IV C. II and III D. II and IV

In a falling market, which orders will be executed? I Open Buy Stops II Open Buy Limits III Open Sell Stops V Open Sell Limits A. I and II B. III and IV C. I and IV D. II and III

Passive asset management is: A. buying securities positions and holding them to the liquidation date of the portfolio B. buying securities positions and holding them until pre-established prices are reached C. selecting securities to be purchased for each asset class based upon fundamental analysis D. using index funds as the investments for each asset class

Prior to recommending a specific 529 college savings plan to a customer, a representative should consider all of the following EXCEPT: A. Customer's investment objective(s) B. Age of the beneficiary C. Number of years until the funds are needed D. Age of donor

S Corporations: I are limited as to the number of investors I give limited liability to investors III allow for flow through of gains and losses A. I only B. II only C. I and II D. I, II, III

Section 529 plans generally permit: I tax deductible contributions by the donor II non-tax deductible contributions by the donor III taxable distributions to the recipient to pay for higher education IV non-taxable distributions to the recipient to pay for higher education A. I and III B. I and IV C. II and III D. II and IV

Specialists (DMMs) on the New York Stock Exchange can perform all of the following functions EXCEPT: A. act as a market maker B. act as a broker's broker C. handle odd-lot transactions D. act as an underwriter

Tactical portfolio management is the selection of the: A. securities in which to invest B. asset classes in which to invest C. target asset allocation for each asset class selected for investment D. variation permitted in target asset allocation for each asset class selected for investment

The Investment Policy Statement for a qualified plan under ERISA will cover which of the following? I Specific assets classes in which the plan may invest II Asset allocation percentages for each asset class III Names and roles of trustee(s) and plan manager(s) IV Discussion of investment objective, needs, risk tolerance and investment time horizon A. I and II only B. III and IV only C. I, II, III only D. I, II, III, IV

The Third Market trades: A. listed and unlisted stocks between institutions without the use of a broker B. listed securities on the trading floors of regional exchanges C. unlisted securities over-the-counter D. listed securities over-the-counter

The settlor of a trust does all of the following EXCEPT: A. donates the assets to the trust B. appoints the trustee C. establishes the purpose of the trust D. manages the assets of the trust

The use of index funds as investment vehicles for asset classes: I increases market risk II reduces market risk III increases the standard deviation of return IV reduces the standard deviation of return A. I and III B. I and IV C. II and III D. II and IV

To open an account for an individual customer, an investment adviser representative should do all of the following EXCEPT: A. determine that the customer has an adequate liquid emergency fund B. determine that the customer has adequate insurance coverage to meet expected needs C. investigate and discuss the customer's investment goals and needs over the investment time horizon D. require the customer to pay off all credit card balances prior to making investment recommendations

What family member(s) could be the alternate payee(s) in a QDRO? A. Children B. A single spouse C. Both spouses D. Spouses and children

What is the maximum amount that an individual can contribute to a 529 plan without gift tax consequences in 2020? A. $6,000 B. $15,000 C. $56,000 D. $75,000

When an agent of an investment adviser prepares a client balance sheet, all of the following are considered to be personal possessions EXCEPT: A. artwork B. furniture C. jewelry D. investments

Which is NOT a feature of a safe harbor 401(k) plan? A. Mandatory annual employer matching contributions B. No annual "top heavy" benefits testing C. Immediate 100% vesting of employer-paid benefits D. 100% of eligible employees must choose to participate

Which item is NOT included in a client's income statement? A. Interest received from municipal bond investments B. Qualifying dividends received from stock investments C. Interest paid on a mortgage on the client's primary residence D. Unrealized gains from appreciated securities positions

Which of the following BEST describes S corporations? I S corporations have a limited life II S corporations have an unlimited life III S corporations are taxable entities IV S corporations are not taxable entities A. I and III B. I and IV C. II and III D. II and IV

Which of the following are deductible from a taxable estate? I Funeral and administrative expenses II Claims against the estate III State death taxes IV Mortgages against real property owned by the estate A. I and III only B. II and IV only C. II, III and IV only D. I, II, III, IV

Which of the following are deductible from a taxable estate? A. Funeral and administrative expenses B. Claims against the estate and mortgages against real property owned by the estate C. State death taxes D. All of the above

Which of the following is (are) included in the cash flow analysis performed when determining the current financial status of a customer? I Interest income II Earned income III Dividends A. I only B. II only C. I and III D. I, II, III

Which of the following is NOT found in the IPS? A. Investment objectives B. Investment time horizon C. Asset allocation percentages D. Portfolio holding list

Which of the following is the easiest business to form? A. C Corporation B. S Corporation C. Limited Partnership D. General Partnership

Which of the following statements are TRUE regarding gift and estate taxes? I Gift and estate taxes are progressive taxes II Gifts valued up to $15,000 in 2020 are excluded from tax III The first $11,580,000 of an estate (in 2020) is excluded from tax IV Tax liability rests with the donor or estate A. I and II only B. III and IV only C. II, III, IV D. I, II, III, IV

Which of the following statements are TRUE regarding non-revocable trusts? I Income is taxed at the rate scheduled for the grantor II Income is taxed at the rate scheduled for the trusts III The grantor has the right to reassume control over the assets of the trust IV The trustee has the right to manage the assets of the trust A. I and III B. I and IV C. II and III D. II and IV

Which of the following statements are TRUE regarding the distributions from an Individual Retirement Plan funded with non-deductible contributions? I Distributions can start at any age without penalty II Distributions can start at age 59 1/2 without penalty III Distributions are 100% taxable IV Distributions are partially taxable; and partially non-taxable A. I and III B. I and IV C. II and III D. II and IV

Which of the following statements are TRUE regarding the distributions from an Individual Retirement Plan? Distributions: I must start at age 59 1/2 II must start at age 70 1/2 III are 100% taxable at ordinary income tax rates only if the original contribution was non-deductible IV are 100% taxable at ordinary income tax rates only if the original contribution was deductible A. I and III B. I and IV C. II and III D. II and IV

Which of the following statements are true about stop orders? I Buy stop orders can accelerate price advances in bull markets II Sell stop orders can accelerate price declines in bear markets III Buy stop orders limit losses on short stock positions IV Sell stop orders limit losses on long stock positions A. I and II only B. III and IV only C. II and IV only D. I, II, III, IV

Which of the following statements concerning 403(b) plans are TRUE? I Investments are limited to annuities II An employee who elects salary deferral to a 403(b) plan cannot elect salary deferral to another retirement plan III A 403(b) plan can provide only for employee contributions without employer contributions IV Deferrals to a 401(k) plan reduce the amount that an employee can defer to a 403(b) plan A. I and II only B. I and III only C. II and III only D. III and IV only

Which of the following would be an asset on a client's personal balance sheet? A. dividends received from stock investments B. policy value of term insurance C. interest received from bond investments D. cash value of whole life insurance

Which statement is NOT true regarding the role of the trustee? A. The trustee owes a duty to the beneficiaries to comply with the prudent investor rule B. The trustee must invest and manage trust assets solely in the interest of the beneficiaries C. If the trustee has 2 or more beneficiaries, the trustee must act impartially, taking into account any differing interests of the beneficiaries D. The trustee is prohibited from delegating investment and management functions to an agent unless the beneficiary approves

Which statement is TRUE about Coverdell Education Savings Accounts? A. Contributions are tax deductible; distributions are taxable B. Contributions are tax deductible; distributions are not taxable C. Contributions are not tax deductible; distributions are taxable D. Contributions are not tax deductible; distributions are not taxable

Which statement is TRUE about the grantor of a trust? A. The grantor can be the grantor only B. The grantor can be the trustee C. The grantor can be the beneficiary D. The grantor can be any of the above

Which statements are TRUE about Roth IRAs? I Contributions must cease at age 70 1/2 II Contributions can continue after age 70 1/2 III Distributions must start after age 70 1/2 IV Distributions are not required to start after age 70 1/2 A. I and III B. I and IV C. II and III D. II and IV

Which statements are TRUE about mutual fund distributions that are automatically reinvested? I Dividend distributions that are automatically reinvested are not taxable until the shares are redeemed II Dividend distributions that are automatically reinvested are taxable in the year the distribution is made III Capital gains distributions that are automatically reinvested are not taxable until the shares are redeemed IV Capital gains distributions that are automatically reinvested are taxable in the year the distribution is made A. I and III B. I and IV C. II and III D. II and IV

Which statements are TRUE regarding the taxation of capital gains? I A capital gain is first considered to be long term if a position is liquidated at a profit after being held for 1 year or less II A capital gain is first considered to be long term if a position is liquidated at a profit after being held for over 1 year III For investors in the maximum tax bracket, any long term capital gains will be taxed at the same tax rate as that bracket IV For investors in the maximum tax bracket, any long term capital gains will be taxed at a lower rate than that bracket A. I and III B. I and IV C. II and III D. II and IV

Which statements are TRUE? I Contributions to a 529 plan are tax deductible II Contributions to a 529 plan are not tax deductible III Contributions to a Coverdell ESA are tax deductible IV Contributions to a Coverdell ESA are not tax deductible A. I and III B. I and IV C. II and III D. II and IV

Which statements are TRUE? I Traditional 401(k) plans require mandatory annual employer matching contributions II Safe harbor 401(k) plans require mandatory annual employer matching contributions III Traditional 401(k) plans require 100% vesting of employer-paid benefits IV Safe harbor 401(k) plans require 100% vesting of employer-paid benefits A. I and III B. I and IV C. II and III D. II and IV

Internal Revenue Code Section 1031: A. permits a like-kind exchange of appreciated real estate for another investment property to defer capital gains tax due B. values securities held in an estate at fair market value at the date of death, avoiding capital gains tax on appreciated positions C. allows for the swap of an investment that has depreciated for another similar but not identical asset, with no disallowance of the capital loss D. defers the generation skipping tax owed by an estate on assets left directly to grandchildren

Many years ago, a customer bought 100 shares of ABC stock at $40. The customer makes a single gift to his daughter this year of the stock when it is valued at $50. The stock is sold by the daughter when it is worth $55. For tax purposes, the daughter's cost basis in the security is: A. $40 per share B. $50 per share C. $55 per share D. $60 per share

Mutual fund distributions that are automatically reinvested are: A. taxable based on the date of the distribution B. taxable when the shares are redeemed C. taxable upon reaching age 59 1/2 D. not taxable

Short sale transactions are typical for which of the following? I Closed-end funds II Municipal bonds III Treasury bonds IV Limited partnerships A. I and III B. I and IV C. II and III D. II and IV

The business form that is the LEAST advantageous from a taxation standpoint is a(n): A. C Corporation B. S Corporation C. Limited Liability Company D. Limited Partnership

The lower 15% tax rate applies to:I Cash dividends received from stock investmentsII Stock dividends received from stock investmentsIII Stock splits received from stock investments A. I only B. I and II C. II and III D. I, II, III

The maximum permitted annual contribution into a Coverdell ESA is: A. $2,000 in any number of Coverdell ESAs per beneficiary per year B. $2,000 in each Coverdell ESA per beneficiary per year C. $5,000 in any number of Coverdell ESAs per beneficiary per year D. $5,000 in each Coverdell ESA per beneficiary per year

The person who prepares the Trust Agreement is the: A. Trust Attorney B. Grantor of the Trust C. Beneficiary of the Trust D. Trustee

The setting of specific goals for an investment plan to be created for a customer is known as: A. Strategic asset management B. Tactical asset management C. Dollar cost averaging D. Portfolio rebalancing

The simplest way of investing in a mutual fund is: A. buy and hold B. indexing C. rebalancing D. dollar cost averaging

The spread is: I earned by a market maker when it effects a round turn principal transaction II earned by an order entry firm when it effects a riskless agency transaction III the difference between the bid and ask quote IV represents the commission charged for effecting the trade A. I and III B. I and IV C. II and III D. II and IV

The way that unsystematic risk can be avoided is by: A. diversification B. hedging C. rebalancing D. collaring

To open a new account for a non-revocable trust, which statement is true? A. The tax identification number of the trust must be obtained B. The tax identification number of the trustee must be obtained C. The tax identification of the trust beneficiary must be obtained D. There is no requirement to obtain a tax identification number when opening a trust account

Transfer on Death registration would likely be used by which of the following? A. Elderly father and adult son B. Middle age mother and minor daughter C. Unrelated business partners D. Husband and wife

Two young professionals each make $50,000 per year. They are getting married and meet with an Investment Adviser Representative for advice about how their tax status will change once they "tie the knot." The IAR should inform them that they will likely: A. pay higher taxes B. pay lower taxes c reduce future estate taxes D. increase future estate taxes

Under ERISA provisions, a pension fund manager who wishes to write naked index call options: A. can only do so if explicitly allowed in the plan document B. can do so if the plan document allows for options transactions C. can do so without restriction D. is prohibited under ERISA requirements

Value investors: A. seek to find investments that are undervalued by the market B. determine the value of a security through fundamental analysis C. invest in securities included in the Value Line Index D. make their investment decision based upon the market performance of the security

What is the earliest age where funds can be distributed from a 401(k) without a tax penalty? (rule of ?) A. 55 B. 59 1/2 C. 65 D. 70 1/2

Which business form does NOT allow for flow through of income and loss? A. C Corporation B. S Corporation C. Sole Proprietorship D. General Partnership

Which business structure has limited liability? A. S corporation B. Sole proprietorship C. General partnership D. Association

Which business structure has limited liability? A. C corporation B. Sole proprietorship C. General partnership D. Association

Which investment offers tax benefits? A. Municipal bond funds B. REITs C. International Funds D. Index Funds

Which item(s) is (are) needed to determine tax filing status? I Marital status on the last day of the year II Age of the filer II Residency on the last day of the year IV Citizenship of the filer A. I only B. II and IV only C. I, II, III D. I, II, III, IV

Which of the following BEST describes Limited Liability Companies (LLCs)? LLCs: I give limited liability to investors II give unlimited liability to investors III can be structured to give a flow-through tax benefit IV cannot be structured to give a flow-through tax benefit A. I and III B. I and IV C. II and III D. II and IV

Which of the following are attributes of a living trust? (trust transfers assets only) I Taxable build-up of earnings in the trust II Tax-deferred build-up of earnings in the trust III Upon death, the decedent's estate avoids probate IV Upon death, the decedent's estate is subject to probate A. I and III B. I and IV C. II and III D. II and IV

Which of the following investments is NOT categorized into an "asset class"? A. Mutual funds B. Real estate C. Fixed income securities D. Commodities

Which of the following investments is an "asset class"? A. Real estate B. Gold coins C. Mutual fund D. Jewelry

Which of the following is NOT permitted in a defined contribution plan? A. Mandatory employee contributions B. Mandatory employer contributions C. Voluntary employee contributions D. Voluntary employer contributions

Which of the following is a permitted investment in an IRA account? A. U.S. minted gold coins B. Term insurance C. Fine art D. Fixed annuity

Which of the following is a precious metal investment that is permitted in an IRA account? A. platinum B. copper C. zinc D. steel

Which of the following is defined as passive income? A. Distributive share of income from a real estate limited partnership investment B. Dividends received from a real estate investment trust investment C. Interest received from a corporate debenture investment D. Proceeds from the sale of a partnership unit in excess of the tax basis of that unit

Which of the following securities transactions would result in a short term capital gain? I Purchase 100 shares of ABC stock at $50 on January 2, 2020; Sell 100 shares of ABC stock at $60 on July 2, 2020 II Purchase 100 shares of ABC stock at $50 on January 2, 2020; Sell 100 shares of XYZ stock at $60 on July 2, 2020 III Purchase 100 shares of ABC stock at $50 on January 2, 2020; Sell 100 shares of ABC stock at $60 on January 3, 2021 IV Purchase 100 shares of ABC stock at $50 on January 2, 2020; Sell 100 shares of XYZ stock at $60 on January 2, 2021 A. I only B. III only C. I and II only D. III and IV only

Which of the following statements are TRUE about estate or gift tax due? I The amount of tax due is based on the size of the gift or estate II The tax rate is fixed regardless of the size of the gift or estate III A lifetime unified credit is applied against any tax due IV Gifts or bequests made by an individual under age 59½ are subject to a penalty tax A. I and III B. I and IV C. II and III D. II and IV

Which of the following statements are TRUE regarding a joint account with tenancy in common? I A specific percentage ownership is assigned to each party II Each party owns an undivided interest in the account III If one party dies, that person's interest goes to his beneficiary or estate IV If one party dies, the other party wholly owns the account A. I and III B. I and IV C. II and III D. II and IV

Which of the following statements are TRUE regarding revocable trusts? I Income is taxed at the rate scheduled for the grantor II Income is taxed at the rate scheduled for the trusts III The grantor has control over the assets IV The trustee has control over the assets A. I and III B. I and IV C. II and III D. II and IV

Which of the following transactions might result in a potential gift tax liability? A. Grandfather gives $25,000 to a grandchild B. Grandfather gives $25,000 to his wife C. Grandfather gives $25,000 to a charity D. Grandfather gives $25,000, divided equally between 3 grandchildren

Which statement is FALSE about 529 plans? A. The assets in a 529 plan may be used without limit to pay tuition at a private high school B. Contributions are subject to possible gift tax consequences C. Investment earnings are not subject to current income tax D. The beneficiary of a 529 plan may be changed

Which statement is TRUE regarding the tax treatment of bond interest income received by a C Corporation versus that received by an S Corporation? A. In a C Corporation, the interest received is taxable at the corporate level and if a dividend is declared based on the receipt of the interest, then the dividend is taxable at the shareholder level B. In an S Corporation, the interest received is taxable at the corporate level and if a dividend is declared based on the receipt of the interest, then the dividend is taxable at the shareholder level C. In both a C Corporation and an S Corporation, income is only taxable at the shareholder level D. In both a C Corporation and an S Corporation, income is only taxable at the corporate level

Which statements are TRUE about the alternative minimum tax computation? I The alternative minimum tax computation is required for all taxpayers II The alternative minimum tax computation is required only for investors in limited partnerships III If the alternative minimum tax amount is greater than the regular income tax amount, the larger amount must be paid IV If the alternative minimum tax amount is greater than the regular income tax amount, the smaller amount must be paid A. I and III B. I and IV C. II and III D. II and IV

Which statements are TRUE? I Distributions from a 529 plan to pay for higher education costs are not taxable II Distributions from a 529 plan to pay for higher education costs are taxable III Distributions from a Coverdell ESA to pay for qualified education costs are not taxable IV Distributions from a Coverdell ESA to pay for qualified education costs are taxable A. I and III B. I and IV C. II and III D. II and IV

Why would an individual purchasing life insurance establish an ILIT? A. To exclude the death benefit from the decedent's estate B. To maintain control over the policy until death C. To eliminate the possibility of a lawsuit filed by an heir D. To defer the taxation of the death benefit until the heir dies

Your client of many years is age 65 and has just been diagnosed with a short-term terminal illness. He is well-off and has 2 adult children, ages 30 and 35. His investment portfolio is overweighted in small dollar low cost stocks. You should talk to the client about: A. gifting the low cost basis stock to the adult children B. selling the low cost basis stock immediately C. rebalancing the portfolio to reduce the overweighting of small dollar stocks D. selling the low cost basis stock and investing the proceeds in Treasury securities

A customer places an order on the NYSE to buy bonds. The order reads "Buy 5M ABC 9s M '42 @ 90 GTC". Which statement is true about this order? A. The order will be canceled at the end of the day if an execution is not possible B. The order must be executed at a price of 90 or better C. If executed, the customer will pay $4500 for the bonds D. The customer is establishing a short position with this order

A customer wishes to open an account at a bank and name her son as beneficiary. She has $4,500 to deposit and wishes to maintain control of the account and be able to use the funds as she wishes. What type of account can be opened? A. POD brokerage account B. Totten trust account C. Demand deposit account D. Intervivos trust account

A doctor withdraws money from his profit sharing plan to buy a building for his medical practice and to lease to other tenants. The building will be held as an asset of the profit sharing plan. This action is: A. permitted because the dollar amount of assets held in the plan remains the same B. a prohibited transaction between the plan and a party-in-interest C. permitted however the amount withdrawn will be subject to a 6% penalty tax D. permitted only if the plan pays premiums to the PBGC insurance program

A father is writing his will (the testator) and is naming as beneficiaries his 2 adult sons - Son A and Son B, and their children. Son A has 2 children - A1 and A2. Son B has 1 child - B1. Each one will get an equal share "per capita" of the father's estate upon the father's death. Son B predeceases the testator. This means that: A. Son A gets 100% of the assets of the estate upon the death of the testator B. The grandchild B1 gets 25% of the assets of the estate upon the death of the testator C. The grandchildren A1, A2, and B1, each get 33% of the assets of the estate upon the grandfather's death D. No assets will be distributed upon the death of the testator until the grandchildren become adults

A father is writing his will (the testator) and is naming as beneficiaries his 2 adult sons - Son A and Son B. Each one will get an equal share "per stirpes" of the father's estate upon the father's death. Each of the sons has children (the grandchildren of the testator) who are not yet adults. Son A has 2 children - A1 and A2. Son B has 1 child - B1. Son B predeceases the testator. This means that: A. Son A gets 100% of the assets of the estate upon the death of the testator B. the grandchild B1 gets 50% of the assets of the estate upon the death of the testator C. the grandchildren A1, A2, and B1, each get 33% of the assets of the estate upon the grandfather's death D. no assets will be distributed upon the death of the testator until the grandchildren become adults

A father is writing his will (the testator) and is naming as beneficiaries his 2 adult sons - Son A and Son B. Each one will get an equal share of the father's estate "per capita" upon the father's death. Each of the sons has children (the grandchildren of the testator) who are not yet adults. Son A has 2 young children - Grandchild A1 and Grandchild A2 and Son B has 2 children, Grandchild B1 and Grandchild B2. If Son A predeceases the testator, then: A. Son A's 1/2 share goes into his estate B. Son A's share goes to Son B C. Grandchild A1 gets 25% and Grandchild A2 gets 25% of the estate's assets upon the death of the testator D. the deceased son's share reverts back to the father's estate

A father is writing his will (the testator) and is naming as beneficiaries his 3 adult sons. Each one will get an equal share "per capita" of the father's estate upon the father's death. Each of the sons has 2 children (the grandchildren of the testator) who are not yet adults. If one of the sons predeceases the testator, then the: A. deceased son's share goes into the son's estate B. deceased son's share passes to his brothers C. deceased son's shares passes to his children D. deceased son's share reverts back to the father's estate

A fund that invests in Treasury Bills, commercial paper, and guaranteed repurchase agreements is a(n): A. government securities fund B. money market fund C. income fund D. balanced fund

A husband and wife wish to open a joint account. The husband is concerned that if he is sued, that the assets of the account could be subject to claim and wishes to avoid this. Which statement is TRUE? A. This possibility is avoided if the account is opened as Joint Tenants with Rights of Survivorship B. This possibility is avoided if the account is opened as Tenants by Entireties C. This possibility is avoided if the account is opened as Tenants in Common D. This possibility cannot be avoided

A husband and wife wish to open an account that allows either party to trade or draw checks; and that becomes the property of the surviving spouse if one should die. The proper ownership form is: A. Tenants in Common B. Joint Tenants with Rights of Survivorship C. Separate Individual accounts D. Joint Partnership account

A medical student will complete her residency and go into medical practice in 4 years. She needs to purchase expensive medical equipment to start the practice. In order to determine the amount of money that must be invested today to meet this capital need, all of the following are needed EXCEPT: A. current cost of medical equipment B. expected level of outstanding student loans C. assumed rate of return D. expected inflation rate

A portfolio manager who believes that an extremely large short interest in NYSE listed issues is bullish would be called a: A. fundamentalist B. contrarian C. market timer D. technician

A registered representative is appointed as a trustee to manage the assets on behalf of a beneficiary. The State where the trust is established only permits investments in government guaranteed bonds or investment grade corporate bonds. The limitations placed on the investments made by the trustee are established by the: A. Prudent Man Rule B. Legal List C. Uniform Securities Act D. Investment Advisers Act of 1940

A retirement plan that favors highly compensated employees compared to rank-and-file employees is a: I top heavy plan II key employee plan III qualified plan IV non-qualified plan A. I and III B. I and IV C. II and III D. II and IV

A sell stop order is executed: I in falling marketsII in rising marketsIII at the price specifiedIV at the market price A. I and III B. I and IV C. II and III D. II and IV

A trade of 10,000 shares of stock or more is known as a: A. mega trade B. block trade C. decamil trade D. odd lot trade

A wealthy married couple with 3 adult children have a large estate. They intend to leave their estate to their children, but they both have a life expectancy of at least 15+ years. They are interested in establishing a trust that will minimize estate taxes upon death. The best recommendation would be a(n): A. revocable trust B. irrevocable trust C. testamentary trust D. blind trust

All of the following are "preference" items included in the alternative minimum tax computation EXCEPT: A. Excess intangible drilling costs B. Straight line depreciation C. Excess depletion D. Excess depreciation

All of the following are considered when evaluating a customer's tax status EXCEPT: A. Age B. Citizenship C. Total earnings as of the last day of the tax period D. Residency

If the alternative minimum tax computation is less than the regular income tax computation, which statement is TRUE? A. The alternative amount is due B. The regular amount is due C. The alternative amount is added to the regular amount, with the combined amount due D. The taxpayer selects the computation he wishes to use for that year, but must continue using that method in future years

In 2020, the maximum contribution that an individual can make to an IRA is: A. $5,000 B. $6,000 C. $6,500 D. $7,500

In early January, a grandmother buys shares of a company as an investment. At the end of February of the following year, the grandmother gifts 1/2 of the stock holding to her granddaughter. On the gifted stock, the grandmother's cost basis was $1,000 and the market value at the time of the gift was $2,000. In March following the gift, the grandmother dies and bequeaths the remainder (the other 1/2) of the stock in the company to the granddaughter. At the date of death, that holding was worth $3,000. Six months later, the stock has doubled in value and the granddaughter sells the entire holding. What is the tax consequence? A. $8,000 short term capital gain B. $8,000 long term capital gain C. $3,000 short term capital gain and $5,000 long term capital gain D. $5,000 short term capital gain and $3,000 long term capital gain

In the same year, a customer has $14,000 of long-term capital losses on stock positions and $4,000 of short-term capital gains on options positions. Which statement is TRUE? A. The capital losses can be netted against the capital gains and a $10,000 net capital loss is reported, all of which is deductible B. The capital losses can be netted against the capital gains and a $10,000 net capital loss is reported, $3,000 of which is deductible C. The $14,000 of capital losses on the stock positions must be reported separately from the $4,000 of capital gains on the options positions, with all $14,000 of capital losses being deductible and all $4,000 of capital gains being taxable D. The $14,000 of capital losses on the stock positions must be reported separately from the $4,000 of capital gains on the options positions, with only $3,000 of capital losses being deductible and all $4,000 of capital gains being taxable

A customer makes the following investments in ABC stock: Date Amount Price Per Share 1/1 $6,000 $10 4/1 $6,000 $12 7/1 $6,000 $15 1 $6,000 $20 What is the customer's average cost per share? (total investment/total number of shares) A. $13 B. $13.33 C. $14.25 D. $14.50

An investment adviser representative (IAR) actively trades his client accounts, concentrating on equity and ETF trades, normally routing the trades through ABC Brokerage, a broker-dealer affiliated with the RIA. The IAR gets a new large customer, who wants a large portion of her portfolio invested in municipal bonds. ABC Brokerage does not have a municipal bond trading desk, so the IAR sends his municipal bond trades for the client to XYZ Brokerage, which specializes in municipal bonds of the client's state. This is an example of: A. trading away B. haircutting C. trading ahead D. diversifying

An investment adviser would recommend to a client that he or she should buy which of the following in order to properly fund an investment plan if the client dies prematurely? A. Life insurance B. Life annuity C. Bonds D. Mutual funds

An investment strategy where a higher price is paid for a stock based upon expected returns is: A. growth investing B. value investing C. conservative investing D. passive investing

An investor in a limited partnership generating passive losses can offset these against: A. income generated from direct investments in real estate B. dividends received from blue chip corporations C. capital gains generated from the sale of partnership units D. income generated from investments in municipal bonds

An investor's securities portfolio has depreciated by $3,000 this year. How much of the loss can the investor deduct on this year's tax return? A. 0 B. $1,500 C. $3,000 D. $6,000

At the initial discussion phase with a customer about portfolio planning, which of the following is NOT necessary? A. Testamentary letter B. Listing of customer brokerage accounts C. Life insurance coverage held by the customer D. Listing of assets owned by the customer

Buy limit orders are: I placed below the current market value II placed above the current market value III executed if the market falls IV executed if the market rises A. I and III B. I and IV C. II and III D. II and IV

Contingent bond portfolio immunization: A. is an investment approach where an active fund manager will switch to a defensive strategy if the portfolio falls below a predetermined point B. matches the maturity of each expected liability to an investment that will provide cash flows to match C. uses put options to hedge against potential market interest rate increases that will devalue the value of positions held in the portfolio D. periodically liquidates positions that have increased in value and uses to proceeds to invest in positions that have decreased in value

ECNs trade: A. stocks B. stock options C. bonds D. mutual funds

Excess contributions to an IRA are subject to: A. a 6% penalty tax B. a 10% penalty tax C. a 15% penalty tax D. penalty tax only if the account owner is under age 59 1/2

If a customer has a margin account at a broker-dealer, the customer: I can receive a margin call II cannot receive a margin call III can receive a maintenance call IV cannot receive a maintenance call A. I and III B. I and IV C. II and III D. II and IV

If a firm effects trades solely on an principal basis, the firm: I carries inventory II does not carry inventory III is a market maker IV is not a market maker A. I and III B. I and IV C. II and III D. II and IV

If a gift of securities is made to a family member, which of the following are TRUE? I The donor may have gift tax liability if the gift's value is over $10,000 indexed for inflation II The recipient may have gift tax liability if the gift's value is over $10,000 indexed for inflation III The cost basis to the recipient is the same as the donor's IV The cost basis to the recipient is the same as the market value of the securities on the gift date A. I and III B. I and IV C. II and III D. II and IV

If a passively managed fund either underperforms or overperforms the benchmark index, this is called the: A. tracking error B. alpha coefficient C. opportunity cost D. margin of error

If an individual, aged 69, takes a withdrawal from his IRA, which statement is TRUE? A. The amount withdrawn is subject to regular income tax only B. The amount withdrawn is subject to a 10% penalty tax only C. The amount withdrawn is subject to regular income tax plus a 10% penalty tax D. The amount withdrawn is not subject to any tax

If parents set up Coverdell Education Savings Accounts for their 2 children and contribute $2,000 to each of the accounts, how much can a grandfather and grandmother contribute in that year? A. 0 B. $1,000 C. $2,000 D. $4,000

Income is: I taxed progressively II taxed regressively III taxed at higher marginal rates as income increases IV taxed at the same effective rate as income increases A. I and III B. I and IV C. II and III D. II and IV

Initial Public Offerings (IPOs) are sold for the first time in the: A. primary market B. first market C. third market D. fourth market

If an investment adviser is appointed by a trustee to manage the financial assets of the trust, the adviser has a fiduciary responsibility to the: A. trustee B. beneficiary C. grantor D. donor

A customer margin account shows: 100 shares of ABC @ $50 300 shares of DEF @ $80 200 shares of PDQ @ $30 Debit = $6,000 Reg. T = 50% What is the equity in the account? A. $35,000 B. $29,000 C. $23,500 D. $17,500 Long Market Value-Debit=Equity%

A customer in the 28% tax bracket has $9,000 of capital losses and $5,000 of capital gains. How much loss is deductible from this year's tax return? A. $0 B. $3,000 C. $4,000 D. $5,000

A customer made the following purchases of fund shares under a dollar cost averaging plan. Month Investment POP 1 $600 $60 2 $600 $50 3 $600 $55 4 $600 $40 The customer would break even if the NAV per share is:(figure out number of shares purchased inv/pop) A. $50.00 B. $50.10 C. $51.00 D. $51.25

2 widowed elderly sisters have decided to jointly buy a retirement house in Florida, so that they can save on living expenses and have companionship. However, they want to make sure that upon death, each one's ownership share goes to her living adult children. How should the ownership of the house be titled? A. Joint Tenants With Rights Of Survivorship B. Tenants In Common C. Transfer On Death D. Tenants By Entirety

401(k) plans are typically: I established by the employer II established by the employee III funded by employer contributions IV funded by salary reduction employee contributions A. I and III B. I and IV C. II and III D. II and IV

A 25-year old single customer earns $80,000 per year at a corporation. He contributes the maximum amount to his company's 401(k) plan and wants to put money aside on a tax-deferred basis for the 1st time purchase of a house in 6 years. The best recommendation is that this individual make contributions to a: A. Traditional IRA B. Roth IRA C. Coverdell ESA D. 529 Plan

A 75-year old man: I can continue to make contributions to a Roth IRA II cannot make contributions to a Roth IRA III must take distributions from a Roth IRA IV is not required to take distributions from a Roth IRA A. I and III B. I and IV C. II and III D. II and IV

A customer has $10,000 in passive losses from a limited partnership investment. If the customer has $3,000 of passive income for that tax year, the customer may deduct: A. 0 B. $3,000 C. $5,000 D. $10,000

A customer has invested in a Direct Participation Program and is a limited partner with a 10% interest. In November 2020, the partnership sold assets and realized a gain. It made a cash distribution to the partners using the proceeds generated from the asset sale in January 2021. How is this reported for tax purposes on the K-1 distributed to the customer/partner? A. 10% of the gain is reported as ordinary income in 2020 B. 10% of the gain is reported as a capital gain in 2020 C. 10% of the gain is reported as ordinary income in 2021 D. 10% of the gain is reported as a capital gain in 2021

A customer has the following balance sheet: Cash:$ 20,000 Marketable Securities:$50,000 Market Value Retirement Portfolio:$100,000 Market Value - Cars:$ 30,000 Market Value - Home:$400,000 Market Value - Personal Items and Furnishings:$ 60,000 Bills Payable:$ 50,000 Car Loan:$ 15,000 Mortgage on Home:$250,000 The customer's net worth is: A. $315,000 B. $345,000 C. $350,000 D. $660,000

A customer in the 28% tax bracket has $5,000 of capital losses and $3,000 of capital gains. How much net capital loss is deductible from this year's tax return? A. $0 B. $2,000 C. $3,000 D. $5,000

An 85-year old client owns a portfolio that is yielding 1.2%. His expenses have increased by 15% this year, and he is worried about having sufficient income to pay his increased expenses. Other than his portfolio, his only asset is his fully paid house. Upon his death, he wishes to bequeath his assets to his children. His portfolio consists of: 40% Money Market Fund10% Equities50% Intermediate Term Bonds There is a new issue corporate bond available with a 5 year maturity, AA rated, yielding 2.4%. Also available are 20 year Treasury Bonds yielding 4%. What is the best recommendation to the customer? A. Leave the portfolio alone and wait for interest rates to rise before taking any action B. Liquidate 75% of the money market fund holding and invest it in the corporate bond issue C. Liquidate 75% of the money market fund and invest it in the Treasury Bond issue D. Liquidate 75% of the money market fund and invest it in a growth fund

An IAR meets for the first time with a married couple, ages 24 and 26, that have 3 young children. They own their own home that has a market value of $250,000 and a $200,000 mortgage. They both work and have a combined annual income of $90,000. They have liquid assets available for investment of $28,000. The IAR should: A. recommend that the couple buy life insurance to pay off the mortgage in the event of death of one of the parents B. obtain information about the customer's investment objectives and capital needs C. recommend the opening of Coverdell ESAs for the children D. tell the customers to pay off their mortgage before making any investments

An Investment Adviser Representative (IAR) manages the assets of the ABC Corporation Profit Sharing Plan. The trustee of the plan contacts the IAR, explaining to the IAR that he wants a check drawn from the plan account to buy a building that ABC Corporation will occupy. The IAR should: A. refuse to issue the check B. refuse to issue the check because it is a breach of the IAR's fiduciary obligation C. issue the check D. tell the trustee that the check can only be issued if paperwork is provided showing that ABC Corporation has put up collateral equal to the amount of the check

An elderly father owns a classic car that was purchased many years ago for $7,500. The father dies and bequeaths the car to his son. At the date that the car was bequeathed to the son, the car was valued at $20,000. A few years later, the son sells the car for $22,500. What is the tax consequence to the son? A. No capital gain or loss because the item sold was personal property B. $2,500 long term capital gain C. $12,500 long term capital gain D. $22,500 long term capital gain

An individual client purchased his residence 5 years ago for $200,000. For 3 of the last 5 years, the client rented out the property for income, and lived in the house of 2 of those years. The client sells the house for $500,000. How much of the gain is taxable? A. 0 B. $50,000 C. $250,000 D. $300,000

An individual owns a Traditional IRA from which she has never taken a distribution. Her 70th birthday falls on December 31, 2020. Her first distribution must be taken no later than A. April 1st of 2021 B. April 1st of 2022 C. June 30th of 2023 . June 30th of 2024

Bond portfolio immunization protects the portfolio against: A. default risk B. interest rate risk C. purchasing power risk D. liquidity risk

Broker-dealers are permitted to execute all of the following over-the-counter transactions EXCEPT: A. Agency trades where the customer is charged a fair and reasonable commission B. Agency trades where the customer is charged a fair and reasonable mark-up or mark-down C. Principal trades where the customer is charged a fair and reasonable mark-up or mark-down D. Simultaneous transactions where both buyer and seller are charged a fair and reasonable commission

Broker-dealers are permitted to execute the following over-the-counter transactions? I Agency trades where the customer is charged a commission II Agency trades where the customer is charged a mark-up or mark-down III Principal trades where the customer is charged a commission IV Principal trades where the customer is charged a mark-up or mark-down A. I and III B. I and IV C. II and III D. II and IV

Distributions from an Individual Retirement Account must commence: A. by April 1st of the year preceding that person reaching age 70 ½ B. by April 1st of the year following that person reaching age 70 ½ C. upon reaching age 70 ½ D. upon reaching retirement

ERISA legislation was enacted: I to protect employee retirement funds II to protect employer retirement funds III from employee investment mismanagement IV from employer investment mismanagement A. I and III B. I and IV C. II and III D. II and IV

For the past 5 years, an individual earning $20,000 per year, who was not covered by another retirement plan, has made annual contributions to an Individual Retirement Plan. That individual has changed jobs at the same salary and has been included in that company's qualified retirement plan. Which statement is TRUE? A. Annual contributions to the Individual Retirement Account must cease B. Annual contributions to the Individual Retirement Account can continue and are an adjustment to income each year C. Annual contributions to the Individual Retirement Account can continue but no adjustment to income is allowed D. The employee has 60 days to roll over the funds from the Individual Retirement Account to the qualified retirement plan in order to maintain tax-deferred status on the funds

Funds withdrawn from an IRA after age 59 1/2 are: A. not taxed if rolled over to another IRA within 90 days B. taxed at ordinary income tax rates C. taxed at ordinary income tax rates for distributions that are part of the build-up in the account and at capital gains rates for distributions that are the return of original capital contributed D. taxed at the same rate as long term capital gains

If a defined benefit plan is terminated due to the bankruptcy of the company, any unfunded pension liability is: A. not covered by any type of insurance B. covered by PBGC C. covered by FDIC D. covered by SIPC

Which of the following is NOT a characteristic of a cash account? A. Marginable securities may be purchased in a cash account B. Marginable securities may be sold short in a cash account C. Non-marginable securities may be purchased in a cash account D. Non-marginable securities may be sold long in a cash account

Which of the following is NOT a fiduciary under ERISA? A. Plan trustee B. Plan participant C. Plan administrator D. Plan adviser

Which of the following is an acceptable investment in an Individual Retirement Account? A. Municipal Bonds B. U.S. Minted Gold Coins C. Commodities Futures Contracts D. Variable Annuity Contracts

Which of the following is an asset class? A. Diamonds and precious jewels B. Real estate C. Annuity D. S&P 500 Index

Which of the following is covered by ERISA? A. State employee pension plans B. Private employee pension plans C. Individual Retirement Accounts D. Medical Trust Savings Accounts

Which of the following statements concerning 529 plans are TRUE? I Contributions are tax deductible to the donor II Distributions to pay for qualified higher education expenses are tax-free III The beneficiary can be changed to another family member without tax consequences IV Any plan balance must be distributed to the beneficiary at age 30 A. I and II only B. II and III only C. III and IV only D. I, II, III, and IV

Which of the following statements concerning a 457 plan is TRUE? A. The plan is established by the government employee B. The plan can discriminate in favor of highly paid employees C. The plan cannot exclude rank-and-file employees D. The plan limits the employer deduction to 25% of participant compensation

Which of the following statements concerning taxation of 401(k) plans are TRUE? I Employees must pay income tax in the year earned of salary that is deferred II Employer matching contributions are tax deductible to the employer III Distributions are taxed at ordinary income tax rates IV Investment earnings are taxed to the employer in the year earned A. I and II only B. II and III only C. III and IV only D. I, II, III, and IV

Which orders are lower in price than the current market? I Open Buy Limits II Open Buy Stops II Open Sell Limits IV Open Sell Stops A. I and III B. I and IV C. II and III D. II and IV

Which statement is TRUE about ERISA's fiduciary requirement? A. There is no requirement to appoint a plan fiduciary as long as the plan assets are held in trust B. The plan fiduciary is a person who exercises control or discretion over the plan C. There can only be one plan fiduciary named in the plan document D. The fiduciary has a dual obligation to act in the interests of the plan sponsor and the plan beneficiaries

Which statement is TRUE about a 73-year old man that is still employed earning $30,000 who has a Roth IRA? A. This person can continue to make tax-deductible contributions B. This person can continue to make non-tax deductible contributions C. This person cannot take distributions without penalty D. This person cannot change the account beneficiary

Which statement is TRUE for both Traditional IRAs and Roth IRAs? A. Distributions are taxed as ordinary income B. There is no annual taxation of investment earnings C. Contributions to one do not reduce the amount that can be contributed to the other D. No contributions are permitted once the owner reaches age 70 ½

Which statement is TRUE regarding calculating cost basis for tax purposes for stocks versus calculating cost basis for corporate bonds? A. The cost basis calculation for stocks takes into account amortization of premiums paid or accretion of any discount earned while the cost basis calculation of bonds does not B. The cost basis calculation for bonds takes into account amortization of premiums paid or accretion of any discount earned, while the cost basis calculation of stocks does not C. The cost basis calculation for both stocks and bonds takes into account amortization of premiums paid or accretion of any discount earned D. The cost basis calculation for both stocks and bonds does not take into account amortization of premiums paid or accretion of any discount earned

A 40-year old man wishes to withdraw funds from his Traditional IRA without paying a penalty. This is permitted: A. under no circumstances B. if the funds are borrowed and re-deposited to the account within 60 days of withdrawal C. to pay for qualified educational expenses D. if the regular tax is paid on the distribution

A 403(b) plan is established by a: A. self-employed individual with contributions based upon the individual's self-employed income B. for-profit corporation with contributions made by employees as a salary reduction C. not-for-profit organization with contributions made by employees as a salary reduction D. government agency with contributions made by the employer on behalf of the employees

A 55-year old man buys 100 shares of XYZ stock at $40 per share on 2/1/2020. As of 12/1/2020, the stock has doubled in price, appreciating to $80 per share. The customer was thinking of selling the stock at that point, but decided to wait until 1/2/2021 to sell, at which point the price was still $80 per share. The tax consequence to the customer is: A. $4,000 ordinary income, but no 10% penalty tax B. $4,000 ordinary income with a 10% penalty tax imposed C. $4,000 short term capital gain D. $4,000 long term capital gain

A 55-year-old individual who is in good health wishes to take a lump sum distribution from his 401(k) plan. Which statement concerning the tax treatment of the distribution is TRUE? A. The distribution is subject to ordinary income tax only B. The distribution is subject to a 10% penalty tax only C. The distribution is subject to ordinary income tax and a 10% penalty tax D. The distribution is 100% taxable as long-term capital gain

A Registered Investment Adviser has a client with the following stock positions: Cost basis Current market ABC$60,000 $10,000 DEF$20,000 $ 40,000 PDQ$25,000 $30,000 XYZ$80,000 $40,000 The customer has a realized short term capital gain of $20,000 on another stock that was sold and wants to generate a $20,000 capital loss to offset this gain. What should the customer do? A. Sell $5,000 of ABC B. Sell $10,000 of ABC C. Sell $20,000 of XYZ D. Sell $40,000 of XYZ

A couple owns a home purchased for $200,000 and files for bankruptcy. The home has a $125,000 mortgage and is sold by the trustee in bankruptcy for $175,000. Which statement is TRUE? A. The holder of the mortgage receives $175,000 from the sale of the property B. The holder of the mortgage receives $125,000 from the sale of the property and the extra $50,000 goes to the debtor couple C. The holder of the mortgage receives $125,000 from the sale of the property and the extra $50,000 can be claimed by any additional creditors D. The couple receives the $175,000 from the sale of the property and has a $25,000 capital loss

A couple owns a home together and they file for bankruptcy. If there is an excess of funds from the sale of the home, where does the extra money go? A. To the mortgagor (debtor) couple B. To the mortgagee (mortgage) holder C. To the additional creditors D. To the secured creditors

A customer has a Roth IRA that has experienced considerable losses on the securities positions held in the account, but has not yet sold those positions. Which statement is TRUE about the customer's ability to deduct these losses? A. The losses can never be deducted B. The losses can only be deducted if the depreciated securities positions are sold by April 15th of the following tax year C. The losses can only be deducted if the Roth is liquidated and the investments are sold for less than their cost basis D. The losses can be deducted without restriction in the current tax year

A customer has purchased 1,000 shares of ABC stock at $30 per share, paying a commission of $1 per share for the transaction. ABC stock declares a 5% stock dividend. When the dividend is paid, the tax status of the investment is: A. 1,000 shares held at a cost basis of $30 per share B. 1,000 shares held at a cost basis of $31 per share C. 1,050 shares held at a cost basis of $29.52 per share D. 1,050 shares held at a cost basis of $30 per share

A customer has purchased 5,000 shares of ABC corporation stock in lots of 100 shares over an extended period of time at varying prices. The customer now sells 500 of the shares. Which statement is TRUE? A. IRS rules require that First-In, First-Out (FIFO) accounting be used to identify the shares sold when computing any gain or loss B. IRS rules require that Last-In, First-Out (LIFO) accounting be used to identify the shares sold when computing any gain or loss C. IRS rules allow the taxpayer to specify which shares are being sold D. IRS rules require that the method giving the largest capital gain be used

A customer has the following investment mix: 25%Growth Stocks25%Defensive Stocks25%Investment Grade Corporate Bonds25%Speculative Stocks During a period of economic recession, the best performing asset classes are likely to be: I Growth Stocks II Defensive Stocks III Investment Grade Corporate Bonds IV Speculative Stocks A. I and III B. I and IV C. II and III D. II and IV

A customer in the 28% tax bracket has $4,000 of capital gains and $12,000 of capital losses. How much unused loss is carried forward to the next tax year? A. 0 B. $3,000 C. $5,000 D. $8,000

A customer places an order on the NYSE to sell bonds. The order reads "Sell 5M ABC 9s M '42 @ 90 GTC." At which of the following prices may the order be executed?I 89II 90III 91IV 92 A. I and II only B. III and IV only C. II, III, IV D. I, II, III, IV

A divorced father with 2 young children would be best off choosing which tax filing status? A. Single B. Married Filing Separately C. Head of Household D. Divorced

A father and mother established a 529 plan for their son when he was age 12. The son has just turned 18 and is entering college. The father gets the first tuition and boarding bill from the college for $22,000. Since the son will be commuting home every other weekend, the father withdraws $25,000 from the 529 plan to pay for the college bill and the commuting expenses. Which statement is TRUE? (school only) A. There is no tax consequence to the $25,000 withdrawal B. $3,000 of the distribution is subject to regular income tax C. $3,000 of the distribution is subject to both regular income tax and a penalty tax

A father is writing his will (the testator) and is naming as beneficiaries his 2 adult sons - Son A and Son B. Each one will get an equal share of the father's estate "per stirpes" upon the father's death. Each of the sons has children (the grandchildren of the testator) who are not yet adults. Son A has 2 young children - Grandchild A1 and Grandchild A2. If Son A predeceases the testator, then: A. Son A's 1/2 share goes into his estate B. Son A's share goes to Son B C. Grandchild A1 gets 25% and Grandchild A2 gets 25% of the estate's assets upon the death of the testator D. the deceased son's share reverts back to the father's estate

A father is writing his will (the testator) and is naming as beneficiaries his 3 adult sons. Each one will get an equal share "per stirpes" of the father's estate upon the father's death. Each of the sons has children (the grandchildren of the testator) who are not yet adults. If one of the sons predeceases the testator, then the: A. deceased son's share goes into the son's estate B. deceased son's share passes to his brothers C. deceased son's share passes to his children D. deceased son's share reverts back to the father's estate

A married couple with 2 young children, has their assets in a revocable trust. If one spouse dies, the: A. surviving spouse acquires title to the deceased spouse's assets B. deceased spouse's assets are passed to the surviving children C. assets are handled according to the terms of the trust D. surviving spouse acts as trustee for all assets in the trust, including those of the deceased individual

A money manager that believes that a company that reports higher than expected earnings will continue to generate superior returns and stock price appreciation is a follower of: A. value investing B. growth investing C. momentum investing D. efficient market theory

A money manager that employs momentum investing makes investment decisions based on the: A. fundamental value of the company as determined by analysis of the company B. earnings growth of the company C. reported earnings of the company as compared to the "whisper" number D. efficient market theory

If appreciated securities are inherited, the tax basis to the beneficiary is: I cost of the securities II fair market value at the date of death III fair market value 6 months after death if values have fallen IV fair market value 9 months after death if values have fallen A. I or III B. I or IV C. II or III D. II or IV

An employee is a participant in her company's 401(k) plan. She is now 63 years old and wants to retire in 2 years. Her brother is an attorney and tells her that if the company had provided a higher match to her 401(k) contributions, she would have had a much larger retirement balance, and because of this, she may have to defer retirement for 5 more years. Under ERISA, the plan fiduciaries: A. can be sued for damages equal to the 5 additional years of retirement contributions that must be made by the employee B. can be sued for breach of fiduciary duty C. cannot be sued because the level of employer matching contributions is a settlor decision D. cannot be sued because ERISA fiduciaries are given immunity from prosecution

An individual that earns $210,000 per year and that is not covered by another qualified retirement plan would be permitted to: A. make a non-deductible contribution to a Roth IRA that was opened years ago B. make a deductible contribution to a new Roth IRA C. convert a Traditional IRA into a Roth IRA after paying taxes due D. convert a Roth IRA into a Traditional IRA after paying taxed due

An individual that invests a constant dollar amount at regular time intervals over a long-term investment time horizon is: A. rebalancing B. market timing C. dollar cost averaging D. reinvesting

An investment adviser representative has been given the financial assets of a large estate to manage. What should be the IAR's IMMEDIATE concern? A. The monetary needs of the beneficiaries of the estate B. The investment objectives outlined in the will or trust document C. Any upcoming liquidity needs to pay obligations as they are due D. Compliance with the Prudent Investor Act when making investment decisions

An investment approach where an active bond fund manager will switch to a defensive strategy if the portfolio falls below a predetermined point is known as: A. portfolio immunization B. portfolio rebalancing C. contingent portfolio immunization D. contingent portfolio rebalancing

An investor buys 100 shares of ABC stock at $60 in January of 2020. In March of 2021, the stock is worth $100 per share and the investor donates it to a charity. The tax consequences are: I a $6,000 charitable deduction II a $10,000 charitable deduction III no tax due on the appreciation IV tax is due on the appreciation A. I and III B. I and IV C. II and III D. II and IV

An investor has $200,000 invested in an account that earns 3% annually. The investor wishes to withdraw $30,000 per year. If the investor withdraws $30,000 annually, the account will be fully depleted in: A. 4 years B. 6 years C. 8 years D. 10 years

An unmarried couple wishes to open a new account as "JTWROS." What should the registered representative do? A. Open the account without making any further inquiries B. Explain the risks involved with opening such an account C. Ask why they wish to open this type of account D. Refuse to open the account

Buy and hold is an appropriate strategy when investing in: I stocks II stock mutual funds III stock exchange traded funds IV stock options A. I and III B. I and IV C. II and III D. II and IV

Dealers are showing the following quotes for XYZZ stock: XYZZ Stock Bid Ask Size Dealer A 7.25 7.70 10 x 20 Dealer B 7.60 7.85 5 x 10 Dealer C 7.35 7.75 15 x 25 The "size" of the market is: A. 5 x 10 B. 10 x 25 C. 5 x 20 D. 30 x 55

Distributions from an Individual Retirement Plan funded with deductible contributions: I can start at age 59 1/2 II must start by April 1st of the year after reaching age 70 1/2 III are taxable IV are non-taxable A. I and III only B. II and IV only C. I, II, and III D. I, II and IV

Diversification among multiple asset classes reduces the: I market risk of the portfolioII marketability risk of the portfolioIII standard deviation of portfolio returns A. I only B. II and III C. I and III D. I, II, III

Dividend payments made by which of the following are qualified? A. Real Estate Investment Trusts B. Master Limited Partnerships C. Foreign companies that are listed in the United States D. Short seller of stock who remits a payment in lieu of a dividend to the individual from whom the stock was borrowed

ERISA requirements regarding the investments that are suitable for a retirement account stress: A. income potential B. capital gain potential C. safety of principal D. legal list securities

Health Saving Accounts (HSAs): I can be established by all employers that offer health insurance plans II can only be established by employers that have high deductible health insurance plans III are funded with tax-deductible contributions V are funded with non tax-deductible contributions A. I and III B. I and IV C. II and III D. II and IV

On December 10th, 2020, a mother gives a gift to her daughter of 1,000 shares of PDQ stock. The stock was purchased 6 months earlier at a cost basis per share of $48 per share. The market value at the date of the gift was $64 per share. On January 18th, 2021, the mother dies and bequeaths 1,000 shares of DEF to the daughter. The market value of DEF at the date of death is $40 per share and the shares were purchased 2 months earlier by the mother at $35 per share. On February 1st, 2021, the daughter sells the PDQ stock at $70 per share and sells the DEF stock at $50 per share. The tax consequence to the daughter upon selling PDQ and DEF is: A. no capital gain or loss B. $22 per share long term capital gain on PDQ; $10 per share short term capital gain on DEF C. $22 per share short term capital gain on PDQ; $10 per share long term capital gain on DEF D. $6 per share short term capital gain on PDQ; $8 per share short term capital gain on DEF

Orders that are placed higher than the current market are: I buy limitsII buy stopsIII sell limitsIV sell stops A. I and III B. I and IV C. II and III D. II and IV

Retirement plans that must comply with ERISA requirements include all of the following EXCEPT: A. Defined benefit plans B. Profit sharing plans C. Federal Government plans D. Payroll deduction savings plans

Sell limit orders: I used to sell securities at prices that are lower than the current market price II used to sell securities at prices that are higher than the current market III guarantee a specific execution price or better IV do not guarantee a specific execution price or better A. I and III B. I and IV C. II and III D. II and IV

Short Positions 100 ABC @ $60 200 XYZ @ $50 Credit = $40,000 Reg. T = 50% What is the equity in the account? A. $8,000 B. $16,000 C. $24,000 D. $32,000 Credits-Short Market Value=Equity%

Tactical asset allocation requires that: A. a laddered equity portfolio be created B. a buy and hold strategy be employed C. more frequent trading be used to rebalance the portfolio D. neutral cash positions are dominant in the portfolio

The Generation Skipping Tax applies to outright gifts or transfers in trust to: A. siblings B. children C. grandchildren D. nieces and nephews

The amount of money that a customer has available for additional investment based on that customer's earnings in a specific year would be based on: A. Adjusted Gross Income B. Taxable Income C. Discretionary Income D. Portfolio Income

The executor of an estate subject to federal estate tax is permitted to use an alternate valuation date: I for securities that have appreciated after the date of death II for securities that have depreciated after the date of death III that is 6 months from the date of death IV that is 9 months from the date of death A. I and III B. I and IV C. II and III D. II and IV

The market capitalization of a company is the: A. net present value of the company's earnings stream projected infinitely into the future B. book value of the company, excluding the value of intangible assets C. number of common shares outstanding times the price per share D. future value of today's stock price times the earnings multiple times the number of outstanding shares

The purchase of an emerging markets foreign stock index fund will subject the shareholder to all of the following risks EXCEPT: A. exchange rate risk B. political risk C. stock-specific risk D. business risk

The stock market has reacted negatively to the release of strongly negative economic indicators and has fallen by 15% over a 2 week time window. An investor that believes that this is a buying opportunity would be called a(n): A. opportunist B. fundamentalist C. contrarian D. technician

The tax basis for an investor in a limited partnership that establishes the maximum loss deduction is: A. original investment only B. original investment plus partnership debt assumed C. original investment plus partnership debt assumed, plus partnership gains or minus partnership losses D. original investment minus partnership debt assumed, minus partnership gains or plus partnership losses

Under the Employee Retirement Income Security Act of 1974, any plan that complies with Rule 404(c) MUST: I offer employees the ability to change their investments II offer employees the ability to diversify their investments III offer a minimum of 3 different investment strategies with different risk and return characteristics IV require that employees purchase a minimum amount of company stock on an annual basis A. I and II B. III and IV C. I, II, III D. I, II, III, IV

What is the trading characteristic of a Fixed UIT? A. They trade on exchanges like any other stock B. They are securities which are redeemable with the sponsor C. The sponsor makes an OTC market in trust units D. The securities are illiquid and cannot be traded

Which of the following statements about a 529 plan and a UTMA account are TRUE? I Section 529 plan distributions can be used to pay for qualified educational expenses, but UTMA distributions can only be used to pay for higher education expenses II Section 529 plan contribution and UTMA can be made by high-income taxpayers III Section 529 plans allow rollovers of unused account balances to other family members, but UTMAs do not permit rollovers IV Section 529 plans allow deductions for contributions made, but UTMAs do not A. I and III B. I and IV C. II and III D. II and IV

Which of the following statements are TRUE regarding the distributions from an Individual Retirement Plan funded with deductible contributions? I Distributions can start at any age II Distributions can start at age 59 1/2 III Distributions are taxable IV Distributions are non-taxable A. I and III B. I and IV C. II and III D. II and IV

Which of the following statements made during the account opening process on the part of an investment adviser representative would undermine a new customer's level of trust in that representative? A. "When we meet, please bring your latest bank statements, brokerage statements and other pertinent financial information" B. "I really don't know the answer to that question, but I will research it and get back to you" C. "You really are much too conservative in your investment objectives and must increase your risk tolerance level" D. "Before we do anything, let's talk about your immediate and longer term financial goals"

Which of the following transactions can be effected on margin? I The purchase of a mutual fund II The purchase of a closed-end fund III The long sale of stock IV The short sale of stock A. I and II B. III and IV C. II, III, IV D. I, II, III, IV

Which of the following would NOT be included in Adjusted Gross Income on a tax return? A. Social security payments B. Foreign bond interest C. Distributions from non-qualified retirement plans attributable to cost basis D. Distributions from mutual funds subject to Subchapter M

Which of the following would be defined as "earned income" under IRS regulations? I Social Security payments II Tips III Royalty payments IV Bonus payments A. I and II B. III and IV C. II, III, IV D. I, II, III, and IV

Which orders, if executed, guarantee a specific price or better? I Buy LimitsII Buy StopsIII Sell LimitsIV Sell Stops A. I and II B. III and IV C. I and III D. II and IV

Which statement is FALSE regarding employee contributions to a 401(k) plan? A. Employee contributions reduce the employee's taxable income B. Employee contributions are immediately vested C. Earnings on employee contributions are taxed at capital gains rates D. Taxes on employee contributions are deferred until distribution

Which statement is TRUE about a buy stop order? A. A buy stop order guarantees a specific execution price or better B. A buy stop order becomes a limit order when it is activated C. A buy stop order becomes a market order when it is activated D. A buy stop order guarantees a specific execution time

Which statement is TRUE about a rollover from one State's 529 plan to another State's 529 plan? A. State to state rollovers are prohibited B. A rollover is permitted only once every 6 months without tax penalty C. A rollover is permitted only once every 12 months without tax penalty D. A rollover is permitted only once every 24 months without tax penalty

Which statement is TRUE about a sell stop order? A. A sell stop order guarantees a specific execution price or better B. A sell stop order becomes a limit order when it is activated C. A sell stop order becomes a market order when it is activated D. A sell stop order guarantees a specific execution time

Which statement is TRUE about capital gains taxes? A gain on a security held over: A. 6 months is taxed at a lower rate than a gain on a security held over 3 months B. 9 months is taxed at a lower rate than a gain on a security held over 6 months C. 12 months is taxed at a lower rate than a gain on a security held over 9 months D. 15 months is taxed at a lower rate than a gain on a security held over 12 months

Which statement is TRUE about the use of index option strategies by managers of pension plans subject to ERISA requirements? A. Index option trades are permitted without restriction B. Index option trades are permitted only if the options are broad based and exchange traded C. Index option trades are permitted only if such transactions conform with the objectives stated in the plan document D. Index option trades are prohibited under ERISA legislation

Which statement is TRUE about trust taxation? A. The trust is a non-taxable entity B. A Form 1040 must be filed reporting income, gain and loss C. A Form 1041 must be filed reporting income, gain and loss D. A Form 1065 must be filed reporting income, gain and loss

Which statement is TRUE regarding calculating cost basis for tax purposes for stocks versus calculating cost basis for corporate bonds? I The cost basis calculation for stocks takes into account amortization of premiums paid or accretion of any discount II The cost basis calculation for stocks does not take into account amortization of premiums paid or accretion of any discount III The cost basis calculation for bonds takes into account amortization of premiums paid or accretion of any discount IV The cost basis calculation for bonds does not take into account amortization of premiums paid or accretion of any discount A. I and III B. I and IV C. II and III D. II and IV

Book 3

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