Dan Madden, CFP® – Page 10 – Online CFP Program

Calculating Rate of Return

Course: Investment PlanningLesson 1: Key Principles of Investing Student Question: Can you help solve a practice question? I looked through the textbook and my notes, and just couldn’t wrap my brain about how to solve the problem below. The confusing part to me is that the fund was not sold, so there is no sales price,…

Fully Insured vs Currently Insured

Which of the following clients would be considered fully insured under Social Security rules? Maria, age 45, who has earned 10 quarters of coverage in the past 10 years. James, age 62, who has earned 40 quarters of coverage over his lifetime. Angela, age 28, who has earned 6 quarters of coverage in the past 13…

FICA Taxation

Course: Income Tax PlanningLesson 10: Social Security Student Question: Do I understand correctly that all FICA paid in case of employment is deductible/ paid pre-tax (by company as well as employee), whereas in case of self-employment only half is deductible? Instructor Response: Not quite. Employees do not get a deduction for their FICA share. Employers…

Peril vs Hazard

During a risk management review, a financial planner is explaining the difference between perils and hazards to a client. Which of the following correctly identifies a peril and a hazard? Peril: Fire destroying a home Hazard: Faulty wiring in the home Peril: Ice on the sidewalk Hazard: Slipping and breaking a leg Peril: Car left unlocked…

Gifts Added Back to Estate at Death

Course: Estate PlanningLesson 5: Transfer Taxation II Lifetime Transfers Student Question: If the gift tax is paid what is the need to add the gift back to the estate at death? is that not double taxation? Instructor Response: It certainly feels that way, doesn’t it? But it’s really not. If I give away say $1million…

HO-3 Coverage A

Maria owns a single-family home insured under an HO-3 homeowners’ policy. Which of the following is covered under Coverage A – Dwelling? Damage to Maria’s detached garage caused by a windstorm Damage to Maria’s personal property inside the home caused by fire Replacement of the roof of Maria’s home after a hailstorm Medical payments to…

Tax Avoidance versus Evasion

Which of the following scenarios best illustrates tax avoidance rather than tax evasion? Sarah intentionally underreports her cash income from a side business to reduce her taxable income. Tom invests in a municipal bond fund to receive tax-free interest income. Lisa pays her household employee in cash and does not issue a Form W-2 or withhold…

Skip Persons and the Generation Skipping Transfer Tax

Course: Estate PlanningLesson 7: Transfer Taxation IV – Generation Skipping Transfers Student Question: Regarding example below, would the death of the father, Stephen, not move Andrew one step up making him only one generation below Mrs. Jones? Would this not remove the generation skipping transfer tax? EXAMPLE: Upon her death, Mrs. Jones left her estate…

Appropriate Emergency Fund

James and Lisa are married, both age 40, with two children. They have the following monthly expenses: Mortgage: $2,500 Utilities: $400 Groceries: $1,000 Car loans: $600 Insurance premiums: $500 Discretionary spending: $900 They both have stable jobs and contribute equally to a combined gross income of $190,000/year. According to CFP Board recommendations, how much should…

Investment Receipts Definition

Course: Fundamentals of Financial PlanningLesson 3: Personal Financial Statements Student Question: Hi. The lesson states that when looking at the cash flow statement, investment receipts include: interest, dividends, mf capital gains, etc. Are those funds included in the category of investment receipts even if they don’t withdraw the money from their investment accounts? Instructor Response:…