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Calculating Gross Income from Various Sources
A client received an annual salary from his employment of $30,000. He was a 50% owner of both a C corporation and an S corporation. The C corporation had net profits of $24,000, and the S corporation had income of $17,000. Neither corporation made a distribution. The client’s revocable trust had income of $15,000 but…
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Understanding the Investment Loan Interest Deduction
Good to Know Can you deduct the interest you pay on loans used to make investments? Conventional wisdom would have you believe the rules are complex. Yet, we only need to address the following three questions to gain clarity. What kinds of interest paid on investment loans are deductible? How do dividend income and capital…
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Plan Monitoring and Updating Responsibility
Course: Fundamentals of Financial PlanningLesson 9: CFP Board Regulatory Requirements Student Question: Hi In lesson 1, for step 7, I have that a certificant is responsible for monitoring and updating only if explicitly called for in the scope of the engagement. In Lesson 9, I’m reading that the certificant is responsible unless explicitly excluded. Which…
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Calculating Realized Compound Yield on a Bond
An investor bought a bond at par that matures in 15 years. The bond pays an annual coupon of $130 and the reinvestment rate is 9%. What is the realized compound yield of this bond? 11.05% 12.55% 13.00% 14.10% CLICK TO REVEAL ANSWER Expand A is the answer. One would anticipate a realized compound yield…
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Changes to CFP Board Principal Knowledge Topics
CFP® Board Updates Earlier this year, the CFP Board announced the results of the latest Practice Study Analysis, which among other things, informs the board on necessary updates to the Principals Knowledge Topics. These topics are the base of approved educational provider curriculum, and are the topics tested on the CFP Board Exam. The March…
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Retirement Plan Required Minimum Distributions
Course: Retirement PlanningLesson 5: Leveraging Nonqualified Plans for Small Business and Not-For-Profit Employees and Owners Student Question: Hi I’m trying to distinguish when the required minimum distribution amounts are at 72 years old, versus when they are 70 ½. IRA’s are now 72, correct? Is a 401k plan and a 403b 70 1/2? Thank you…
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Underinsured Dwelling Penalty
Sam carries an H0-3 policy with $500,000 of coverage and a $2,000 deductible. It would cost $700,000 to rebuild Sam’s house. How much will his insurance company pay on a $200,000 claim related to a fire that started in Sam’s kitchen? $176,571 $178,571 $231,235 $198,000 CLICK TO REVEAL ANSWER Expand A is the answer. Frank…
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2021 Child and Dependent Care Credit
Good to Know The Child and Dependent Care Credit (a potentially refundable tax credit for 2021) is to incent employment. Employed taxpayers receive a tax credit if they have dependents who need child care. The credit is available to those taxpayers currently employed and those seeking employment. Restrictions, conditions, and coordination rules apply. Restrictions The…
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Maximum Family Benefit
Course: Insurance PlanningLesson 10: Social Security Student Question: Does the maximum family benefit apply to a husband and wife that are both fully insured if the combined total between the two exceeds the maximum family limit? If I understand correctly, the maximum family limit only applies if there are beneficiaries within the family receiving benefits…
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