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Question 1 of 10
1. Question
For how long can the estate tax be due after deceased’s death?
Correct
The gross estate is simply all the assets left behind by the deceased. After certain deductions are made from the gross estate, such as funeral costs, charitable donations, and satisfaction of debts of the deceased, the adjusted gross estate is determined. You may think of it as the formula adjusted gross estate = gross estate – allowable deductions. Spousal and charitable deductions are then made to arrive at the taxable estate. The estate tax is calculated based on that number and due within nine months of the deceased’s death.
Incorrect
The gross estate is simply all the assets left behind by the deceased. After certain deductions are made from the gross estate, such as funeral costs, charitable donations, and satisfaction of debts of the deceased, the adjusted gross estate is determined. You may think of it as the formula adjusted gross estate = gross estate – allowable deductions. Spousal and charitable deductions are then made to arrive at the taxable estate. The estate tax is calculated based on that number and due within nine months of the deceased’s death.
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Question 2 of 10
2. Question
What is step-up increase in basis?
I. If an investor inherits a security as part of an estate, the cost basis is the fair market value of the security on the date of the deceased’s death.
II. When an investor is gifted a security, the cost basis applied to the security is the cost basis of the original owner.
III. It does not apply to an inheritor of an annuity.
IV. It applies to an inheritor of an annuity.
Correct
When an investor is gifted a security, the cost basis applied to the security is the cost basis of the original owner. This is also known as carryover basis. If an investor inherits a security as part of an estate, the cost basis is the fair market value of the security on the date of the deceased’s death. This is also known as a “step-up” increase in basis. The so-called step-up basis does not apply to an inheritor of an annuity. Since securities historically increase in value over time, most investors prefer to receive inherited stock, though this is not always the case.
Incorrect
When an investor is gifted a security, the cost basis applied to the security is the cost basis of the original owner. This is also known as carryover basis. If an investor inherits a security as part of an estate, the cost basis is the fair market value of the security on the date of the deceased’s death. This is also known as a “step-up” increase in basis. The so-called step-up basis does not apply to an inheritor of an annuity. Since securities historically increase in value over time, most investors prefer to receive inherited stock, though this is not always the case.
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Question 3 of 10
3. Question
How much can the investor give to any number of people without incurring a gift tax levied by the federal government?
Correct
The gift tax is a tax on the transfer or bequest of assets by individuals during their lifespan. It is imposed by the federal government and generally not taxed at the state level. As of 2018, the lifetime gifting limit that an investor may gift without incurring tax is $5,600,000. In addition, the investor may give up to $15,000 each year (as of 2018) to any number of people without incurring a gift tax levied by the federal government.
Incorrect
The gift tax is a tax on the transfer or bequest of assets by individuals during their lifespan. It is imposed by the federal government and generally not taxed at the state level. As of 2018, the lifetime gifting limit that an investor may gift without incurring tax is $5,600,000. In addition, the investor may give up to $15,000 each year (as of 2018) to any number of people without incurring a gift tax levied by the federal government.
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Question 4 of 10
4. Question
What are the features of gift tax?
I. It is a tax on the transfer or bequest of assets by individuals during their lifespan.
II. It is imposed by the federal government and generally not taxed at the state level.
III. Spouses may also double the gift to the recipient without the giver or the recipient owing federal gift taxes.
IV. The lifetime gifting limit that an investor may gift without incurring tax is $5,600,000.
Correct
The gift tax is a tax on the transfer or bequest of assets by individuals during their lifespan. It is imposed by the federal government and generally not taxed at the state level. As of 2018, the lifetime gifting limit that an investor may gift without incurring tax is $5,600,000. In addition, the investor may give up to $15,000 each year (as of 2018) to any number of people without incurring a gift tax levied by the federal government. Spouses may also double the gift to the recipient without the giver or the recipient owing federal gift taxes. This practice is sometimes known as “splitting.” Regardless of whether or not gift tax is owed, spouses using the double or “split” rule must file IRS Form 709. Gifts between spouses are usually unlimited. In the case of a non-united States citizen, the gift will be limited. Gift payments made directly to medical and educational providers for qualified expenses are generally unlimited and excluded from gift taxes.
Incorrect
The gift tax is a tax on the transfer or bequest of assets by individuals during their lifespan. It is imposed by the federal government and generally not taxed at the state level. As of 2018, the lifetime gifting limit that an investor may gift without incurring tax is $5,600,000. In addition, the investor may give up to $15,000 each year (as of 2018) to any number of people without incurring a gift tax levied by the federal government. Spouses may also double the gift to the recipient without the giver or the recipient owing federal gift taxes. This practice is sometimes known as “splitting.” Regardless of whether or not gift tax is owed, spouses using the double or “split” rule must file IRS Form 709. Gifts between spouses are usually unlimited. In the case of a non-united States citizen, the gift will be limited. Gift payments made directly to medical and educational providers for qualified expenses are generally unlimited and excluded from gift taxes.
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Question 5 of 10
5. Question
What is not true about IRAs?
Correct
Although the IRS definition of the acronym IRA is individual retirement arrangement, they are most commonly referred to as individual retirement accounts. IRAs were created by federal legislation to provide an immediate benefit and thereby encourage individuals to save for retirement. Nearly all people with earned income in a year may contribute to an IRA in that same year. IRAs are considered qualified accounts; that is, they meet IRS stipulations regarding tax-deductible contributions and tax-deferred growth. There are three types of individual retirement accounts available to investors. Each has different rules and regulations regarding taxation, eligible contributions and limits to those contributions, and characteristics of distributions from the accounts.
Incorrect
Although the IRS definition of the acronym IRA is individual retirement arrangement, they are most commonly referred to as individual retirement accounts. IRAs were created by federal legislation to provide an immediate benefit and thereby encourage individuals to save for retirement. Nearly all people with earned income in a year may contribute to an IRA in that same year. IRAs are considered qualified accounts; that is, they meet IRS stipulations regarding tax-deductible contributions and tax-deferred growth. There are three types of individual retirement accounts available to investors. Each has different rules and regulations regarding taxation, eligible contributions and limits to those contributions, and characteristics of distributions from the accounts.
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Question 6 of 10
6. Question
What are the rules and regulations for three types of individual retirement accounts available to investors?
I. Regarding taxation.
II. Eligible contributions.
III. Limits to those contributions.
IV. Characteristics of distributions from the accounts.
Correct
There are three types of individual retirement accounts available to investors. Each has different rules and regulations regarding taxation, eligible contributions and limits to those contributions, and characteristics of distributions from the accounts. The three types of IRAs are traditional IRAs, Roth IRAs, and simplified employee pension plans, or SEP IRAs. Although they receive similar tax treatment, IRAs are not the same thing as 401(k)s, 403(b)s, etc.
Incorrect
There are three types of individual retirement accounts available to investors. Each has different rules and regulations regarding taxation, eligible contributions and limits to those contributions, and characteristics of distributions from the accounts. The three types of IRAs are traditional IRAs, Roth IRAs, and simplified employee pension plans, or SEP IRAs. Although they receive similar tax treatment, IRAs are not the same thing as 401(k)s, 403(b)s, etc.
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Question 7 of 10
7. Question
Which is not a type of IRA?
Correct
Each has different rules and regulations regarding taxation, eligible contributions and limits to those contributions, and characteristics of distributions from the accounts. The three types of IRAs are traditional IRAs, Roth IRAs, and simplified employee pension plans, or SEP IRAs. Although they receive similar tax treatment, IRAs are not the same thing as 401(k)s, 403(b)s, etc.
Incorrect
Each has different rules and regulations regarding taxation, eligible contributions and limits to those contributions, and characteristics of distributions from the accounts. The three types of IRAs are traditional IRAs, Roth IRAs, and simplified employee pension plans, or SEP IRAs. Although they receive similar tax treatment, IRAs are not the same thing as 401(k)s, 403(b)s, etc.
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Question 8 of 10
8. Question
What are the features of Traditional IRAs?
I. They are accounts to which investors may contribute up to $5,500 per year.
II. The money contributed to the account must be earned income.
III. Investors may not withdraw funds from the account without incurring a 10 percent penalty in addition to ordinary income tax on the withdrawal.
IV. If the investor’s total earned income is less than $5,500, the amount of the contribution is limited to the amount of earned income.
Correct
Traditional IRAs are accounts to which investors may contribute up to $5,500 ($6,500 if that person is over fifty years of age) per year, per individual (2018). The money contributed to the account must be earned income; that is, wages, salaries, and tips, commissions and bonuses, self-employment income, alimony, and nontaxable combat income. If the investor’s total earned income is less than $5,500, the amount of the contribution is limited to the amount of earned income.
Incorrect
Traditional IRAs are accounts to which investors may contribute up to $5,500 ($6,500 if that person is over fifty years of age) per year, per individual (2018). The money contributed to the account must be earned income; that is, wages, salaries, and tips, commissions and bonuses, self-employment income, alimony, and nontaxable combat income. If the investor’s total earned income is less than $5,500, the amount of the contribution is limited to the amount of earned income.
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Question 9 of 10
9. Question
What penalty investors have to pay if he wants to withdraw funds from the Traditional IRA account?
Correct
Investors may not withdraw funds from the account without incurring a 10 percent penalty in addition to ordinary income tax on the withdrawal, unless the IRS deems the withdrawal to be for an extenuating circumstance. After the investor reaches the age of seventy and a half, they must begin taking regular distributions called required minimum distributions, or RMDs.
Incorrect
Investors may not withdraw funds from the account without incurring a 10 percent penalty in addition to ordinary income tax on the withdrawal, unless the IRS deems the withdrawal to be for an extenuating circumstance. After the investor reaches the age of seventy and a half, they must begin taking regular distributions called required minimum distributions, or RMDs.
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Question 10 of 10
10. Question
What is the limit of contribution to traditional IRA account if the investor is over 50 years of age?
Correct
Traditional IRAs are accounts to which investors may contribute up to $5,500 ($6,500 if that person is over fifty years of age) per year, per individual (2018). The money contributed to the account must be earned income; that is, wages, salaries, and tips, commissions and bonuses, self-employment income, alimony, and nontaxable combat income.
Incorrect
Traditional IRAs are accounts to which investors may contribute up to $5,500 ($6,500 if that person is over fifty years of age) per year, per individual (2018). The money contributed to the account must be earned income; that is, wages, salaries, and tips, commissions and bonuses, self-employment income, alimony, and nontaxable combat income.