Test Bank for AWMA Practice EXAMS ALL MODULES

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Test Bank for AWMA Practice EXAMS (ALL MODULES) Questions with Correct Detailed Answers / Rated A+

Dan has bonds maturing in two weeks. Since he bought the bonds interest rates have fallen. To which one these risks are Dan's bonds most likely to be subject?-Financial risk -Default risk -Reinvestment rate risk -Interest rate risk - ANSWER - Reinvestment rate risk

Which of these statements accurately describe characteristics of using life insurance for the informal funding of a nonqualified deferred compensation plan?

It represents an asset that may be purchased to fund the employer's unsecured promise to pay deferred amounts to the employee.It offers the advantage of being able to fund a death benefit immediately.It offers the advantage of various settlement options.It offers the advantage of simplified administration since death proceeds are paid directly to an employee's surviving spouse or other beneficiary.

-II and IV -I and II -I, II, and III -I and III - ANSWER - I, II, and III

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pg. 2 Which statement best explains the unauthorized practice of law?

-A non-attorney who discusses with a licensed attorney whether provisions in their client's will are necessary -A non-attorney who advises a client to have their estate plan updated -A non-attorney who advises a client of potential "red flags" in their estate plan -A non-attorney who advises a client to take actions that will affect their property or legal rights - ANSWER - A non-attorney who advises a client to take actions that will affect their property or legal rights

Changes that have occurred since investment firms changed from private partnerships to publicly traded companies include all of these except

-partners no longer share in both the profits and losses of the firm.-risk taking has increased.-there is greater individual accountability.-profits can be privatized (bonuses) and losses socialized (bailouts). - ANSWER - there is greater individual accountability.

The most important stated life goal of wealthy individuals is

-assuring retirement lifestyle.-maintaining good health.-protecting wealth.-leaving an estate to heirs. - ANSWER - maintaining good health.

Which of these is NOT a preference item or adjustment for purposes of the individual alternative minimum tax?

• Investment interest in excess of net investment income
• The excess of percentage depletion over the property's adjusted basis 2 / 4

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• Interest from a qualified private-activity municipal bond issued in 2007
• Excess intangible drilling costs - ANSWER - Investment interest in excess of net investment income

On January 5th, two years ago, Jody was granted 5,000 incentive stock options on the company stock at an exercise price of $18 per share, the price of the stock on that date. She exercised the options on November 1st of last year when the price was $28 per share, and she wants to preserve the ISO status.What is the earliest date she can sell?

• January 5th of this year
• November 2nd of this year
• Any time after March this year

D)January 5th of next year - ANSWER - November 2nd of this year

Marvin would like to make a transfer of $5 million and receive the gift tax charitable deduction for the transfer. His goals are to benefit a qualified charity while keeping the assets in the family at his death and maximizing the amount of his income tax deduction. Which charitable transfer technique should Marvin utilize?

• Pooled income fund
• Qualified conservation easement
• Charitable remainder trust
• Charitable lead trust - ANSWER - Charitable lead trust

For the current tax year, Paul, an individual taxpayer with an AGI of $265,000, has $3,500 of investment interest expense and $38,500 of investment income. He paid investment adviser fees of $6,800. How much investment interest expense, if any, may Paul deduct in the current tax year?

A) $37,000

• $0

C) $3,500

D) $38,500 - ANSWER - C) $3,500

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pg. 4 Investment interest expense is deductible up to the amount of net investment income. Net investment income is simply the investment income of $38,500. However, the amount deducted may not exceed the amount of actual interest expense incurred ($3,500). The investment adviser fees are not deductible and do not enter into the calculation.

Which statement generally represents the tax consequences to an employer and employee under a nonqualified deferred compensation plan?

• An employer will receive a deduction when the employee recognizes income.
• An employer will receive a deduction when contributions are made to informally fund a plan, and the

employee must recognize an identical amount as income at the same time and for the same reason.

• An employer will not receive a deduction for plan distributions when paid, but the employee will

recognize income when the amount credited to his or her account is nonforfeitable.

• An employer will receive a deduction for plan contributions when paid, and the employee will not be

taxed on the contribution until withdrawn. - ANSWER - An employer will receive a deduction when the employee recognizes income.

Which statement regarding a foreign situs trust is correct?

• These trusts are used because there are no states with debtor friendly trust laws.
• The foreign jurisdiction allows access to trust assets only by creditors who register in the jurisdiction.
• These trusts are often costly to establish and maintain.
• All assets of the trust must be physically located in the foreign jurisdiction. - ANSWER - C) These trusts

are often costly to establish and maintain

Which statement correctly summarizes the Big Five personality traits as they relate to the differences between financial salespeople and financial planners?

• Salespeople ranked higher in extraversion and planners higher in agreeableness.
• Salespeople ranked higher in agreeableness and planners higher in conscientiousness.
• There is very little difference between the extraversion and agreeableness rankings of salespeople and

planners.

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