Which of the following orders would require written discretionary authorization?
A. Buy 1,000 shares of XYZ today
B. Buy 1,000 shares of XYZ when the price is right
C. Buy as many shares of XYZ as you think I should buy when the price is right
D. All of the choices given
ANSWER: C
WHY: written discretionary authorization for the account is only required if the customer lets the rep choose the Action (buy/sell), the Asset (which stock?), or the Amount (# of shares). If the rep is merely choosing the time/price at which to enter an order where the customer has already named the 3 A's . . . that doesn't require written discretionary authorization. So any rep can choose time/price, but only those with discretionary authorization over the account can choose ANY of the three A's.
Showing posts with label practice question. Show all posts
Showing posts with label practice question. Show all posts
Monday, April 6, 2009
Monday, March 9, 2009
Capital Gains
Mary Ann purchased 1,000 shares of ABC on January 1st, 2009. On December 31st, 2009, she sells the shares for a $500 capital gain. If the trade settles on January 4th, 2010, which of the following accurately describes the tax consequences?
A. the gain will be considered long-term
B. the gain will be considered short-term
C. the gain will be treated as dividend income
D. Mary Ann will report the gain or loss for tax year 2010
EXPLANATION: a long-term gain happens when you hold securities for one year plus one day. As the IRS explains at http://www.irs.gov/, your holding period starts the day after you buy the stock and stops with (and includes) the day you sell it. So, if Mary Ann buys stock on January 1st, 2009, she needs to sell it no sooner than January 2nd, 2010 if she wants a long-term capital gain. Settlement has nothing to do with holding period. When you execute the sale, you no longer hold the stock. The answer is B, the gain will be considered short-term.
A. the gain will be considered long-term
B. the gain will be considered short-term
C. the gain will be treated as dividend income
D. Mary Ann will report the gain or loss for tax year 2010
EXPLANATION: a long-term gain happens when you hold securities for one year plus one day. As the IRS explains at http://www.irs.gov/, your holding period starts the day after you buy the stock and stops with (and includes) the day you sell it. So, if Mary Ann buys stock on January 1st, 2009, she needs to sell it no sooner than January 2nd, 2010 if she wants a long-term capital gain. Settlement has nothing to do with holding period. When you execute the sale, you no longer hold the stock. The answer is B, the gain will be considered short-term.
Saturday, February 28, 2009
Tough Question on Retirement Accounts
Let's look at a tough practice question early on a Saturday morning:
Which of the following are examples of tax-free withdrawals from a Traditional Individual Retirement Arrangement for an individual 52 years of age?
I. first-time purchase of a primary residence
II. certain medical expenses
III. certain educational expenses
IV. series of substantally equal periodic payments under IRS Rule 72t
A. I, II, III
B. II, III
C. I, II, III, IV
D. none of the choices listed
Did you choose Answer C? No? Answer A? Maybe you saw the trap and chose the correct answer, which is Answer . . . D. None of the choices listed. See, the four Roman numerals given are examples of penalty-free withdrawals from an IRA, but, the more important concept is that withdrawals from your Traditional IRA are taxable. If they come out prior to age 59 1/2 they are also penalized, unless there is a provision allowing the individual to take out some money without paying that penalty. If you want to take up to $10,000 out of your IRA to buy your first residence, you will not be penalized; however, you will add the $10,000 to your taxable income for the year and pay your marginal tax rate on it. Same for the other three choices. Not all questions are trick questions, but you need to look them over to make sure there is not a trick before proceeding. If you would like more information on IRA's use the link below. If it doesn't work, click on the title of this post and then type in "publication 590" at the IRS website. I think the following link will take you right to the publication, though: http://www.irs.gov/pub/irs-pdf/p590.pdf
Which of the following are examples of tax-free withdrawals from a Traditional Individual Retirement Arrangement for an individual 52 years of age?
I. first-time purchase of a primary residence
II. certain medical expenses
III. certain educational expenses
IV. series of substantally equal periodic payments under IRS Rule 72t
A. I, II, III
B. II, III
C. I, II, III, IV
D. none of the choices listed
Did you choose Answer C? No? Answer A? Maybe you saw the trap and chose the correct answer, which is Answer . . . D. None of the choices listed. See, the four Roman numerals given are examples of penalty-free withdrawals from an IRA, but, the more important concept is that withdrawals from your Traditional IRA are taxable. If they come out prior to age 59 1/2 they are also penalized, unless there is a provision allowing the individual to take out some money without paying that penalty. If you want to take up to $10,000 out of your IRA to buy your first residence, you will not be penalized; however, you will add the $10,000 to your taxable income for the year and pay your marginal tax rate on it. Same for the other three choices. Not all questions are trick questions, but you need to look them over to make sure there is not a trick before proceeding. If you would like more information on IRA's use the link below. If it doesn't work, click on the title of this post and then type in "publication 590" at the IRS website. I think the following link will take you right to the publication, though: http://www.irs.gov/pub/irs-pdf/p590.pdf
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