CRPC Study Questions with Answers
Types of Will Substitutes - Answer-1. Jointly held property (some forms)
2. Insurance proceeds paid to named beneficiaries
3. The naming of beneficiaries for the proceeds of qualified retirement plans
4. Trusts funded during the owner's lifetime
5. POD and TOD...
Types of Will Substitutes - Answer-1. Jointly held property (some forms)
2. Insurance proceeds paid to named beneficiaries
3. The naming of beneficiaries for the proceeds of qualified retirement plans
4. Trusts funded during the owner's lifetime
5. POD and TOD accounts
Joint Tenancy - Answer-Ownership of the property is equal and passes immediately to
the survivor. Property is not subject to probate process.
Fee Simple - Answer-1. The most complete and absolute form of ownership.
2. One person has all ownership rights and can designate who will receive the property
at their death.
3. No right of survivorship, so owner must have valid will covering the property interest.
4. Must be distributed via probate.
5. AKA Sole Ownership
Tenancy in Common - Answer-1. Property owned by 2+ people, each person has a
percentage of ownership (not necessarily equal).
2. Each owner has the right to sell without the other's consent.
3. If a tenant dies, their share of ownership goes to their estate.
4. Must be distributed via probate.
Community Property - Answer-1. Only available in certain states. Only available to
husband and wife.
2. Property acquired during marriage belongs half to husband and half to wife.
3. Each owner can do with their share as they like (sell, borrow against, etc).
4. Must be distributed via probate.
Tenants by the Entirety - Answer-1. Only between spouses in certain states.
2. Right of survivorship.
3. Does not allow either tenant to sell his interest without the consent of the other
tenant.
4. Acts as a will substitute.
Long-Term Capital Gains - Answer-1. Net gains from the sale of share held by the fund
for more than one year.
2. Subject to the capital gains rates, usually lower than ordinary income tax rates.
Short-Term Capital Gains - Answer-1. Net gains from the sale of shares held by the
fund for one year or less.
2. May be treated as ordinary dividends, thus taxable at ordinary income tax rates.
, Qualified Dividends - Answer-1. Dividends from common stock of domestic corporations
and qualifying foreign corporations.
2. Normally taxed as long-term capital gains (subject to certain holding period
restrictions).
Ordinary or NonQualified Dividends - Answer-1. Investment income earned by the fund
from interest and nonqualified dividends minus expenses; often used a sa blanket term
that includes all taxable income except long-term capital gains.
2. Taxable at ordinary income rates.
Zero-Coupon Bonds - Answer-1. Non-interest-paying debt securities sold at a discount
to face value.
2. Generate tax obligations without generating the cash to pay them through the
accreted value.
3. Generally purchased in nontaxable accounts.
Accreted Value - Answer-The increased value of a zero-coupon bond as it approaches
face value at maturity.
T-bills - Answer-1. Short term versions of zero-coupon bonds (they make not interest
payments but are sold at a discount to face value).
2. Terms range from 4 -52 weeks..
3. Difference between cost and face value is the total return, which is treated as interest
income for income tax purposes.
4. Taxed in the year the T-bill matures, not when it is purchased.
5. Interest income is exempt from state and local taxes, but not federal taxes.
Treasury Notes - Answer-1. A treasury note is a marketable U.S. government debt
security with a fixed interest rate and a maturity between one and 10 years.
2. Treated the same as corporate bonds, except interest is exempt from state and local
taxes, and any original issue discount must be accrued annually and treated as interest
income.
3. Not a cash equivalent.
Treasury Bonds - Answer-1. A marketable U.S. government debt security with a fixed
interest rate and a maturity of more than 10 years with interest payments made semi-
annually.
2. Treated the same as corporate bonds, except interest is exempt from state and local
taxes, and any original issue discount must be accrued annually and treated as interest
income.
Treasury Inflation-Indexed Securities - Answer-1. Combine fixed interest rate with
principal amount of the securities adjusted for inflation.
2. Interest payments taxed upon receipt.
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