CSI AFP-Exam-1 Value Pack (Frequently Bought Together)

Richard pays periodic spousal support and child support under a written separation agreement. Which statement is generally correct?

• A. Child support is taxable to the recipient if paid monthly.
• B. Spousal support is never relevant for tax planning.
• C. Both spousal and child support are always deductible to Richard.
• D. Qualifying periodic spousal support may be deductible to Richard and taxable to the recipient, while child support is generally neither deductible nor taxable.

Demario, age 29, has started his own professional practice. He is single, has a mortgage, and his future earning power is his largest asset. Which insurance should receive priority?

• A. Joint last-to-die life insurance.
• B. Travel medical insurance only.
• C. Whole life insurance for estate equalization.
• D. Disability insurance.

Kendrick, age 55, owns a successful small business, ZXC Inc., valued at $800,000. Kendrick has extensive savings outside of the business and would like to pass the company onto his son at some point in the future.
Kendrick expects the business to increase in value $25,000 per year. If Kendrick decides to use an estate freeze to reduce the amount of taxes he will be required to pay, his financial planner should recommend that he implement the estate freeze at which point in relation to gifting the business to his son?

• A. At the same time as gifting the company.
• B. To take effect at the time of his passing.
• C. Immediately.
• D. One month prior to gifting the company.

Jenny and Herman are looking for tax strategies that will help them better manage their marginal annual tax rates. Jenny is currently the primary income earner in the household. She has a large non-registered portfolio that holds only plain vanilla S & P 500 index funds. Jenny and Herman have a 14-year-old daughter, and they would also like to know what income-splitting opportunities exist. They've presented several ideas to their tax planner, Isaac, for review. Which of the following will likely result in tax attribution to Jenny?

• A. Jenny gifts her portfolio to her daughter who will claim any future investment income on her tax return.
• B. Jenny contributes to a spousal RRSP, which Isaac converts to a spousal RRIF and begins minimum required withdrawals in the first year after funding.
• C. Jenny lends her portfolio to Herman at the Bank of Canada's prescribed interest rate.
• D. Jenny sells her equity security holdings to Herman at fair market value.

Alexander and Irena, age 30 and 32 respectively, are married and have been working full-time for one year.
They have a daughter, age 3, and are expecting their second child. They recently bought a home with a mortgage balance of $390,000 at 4% amortized over 25 years. Their financial planner is trying to determine their tolerance for risk. After completing the life-cycle analysis, how can their financial planner explain the stage in which the couple finds themselves and the risk tolerance associated with it?

• A. They are at the accumulation stage where they can tolerate a high level of risk.
• B. They are at the consolidation stage where they can tolerate moderate to high level of risk.
• C. They are at the financial independence stage where their tolerance of risk is low.
• D. They are at the gifting stage where their tolerance of risk is low.