AWMA ACTUAL FINAL EXAMS ALL QUESTIONS
AND ANSWERS SURE A+
✔✔Ken and Mary are married taxpayers filing a joint tax return. In 2020, they have an
adjusted gross income of $370,000, and their capital gain income (included in the AGI)
is $100,000. They have investment interest expense of $4,000 and state income tax
attributable to the investment income of $2,000. They also have a qualified distribution
from a Roth IRA of $20,000. What is the amount of Medicare contribution tax they must
pay?
A) $3,572
B) $4,560
C) $3,800
D) $4,332 - ✔✔A) $3,572
Ken and Mary will pay a $3,572 Medicare contribution tax (3.8% on $94,000). This is
the lesser of the net investment income ($94,000) or the AGI in excess of the threshold
amount ($370,000 − $250,000, or $120,000). The net investment income is the
investment income of $100,000, reduced by the allowable investment expenses of
$6,000. In this situation, the $94,000 of the net investment income is subject to the
Medicare contribution tax.
Module 5-5
,✔✔Simon recently entered into a pure nonqualified deferred compensation agreement
with his employer. Simon's nonqualified plan benefits are subject to the claims of his
employer's creditors; however, they are not subject to a substantial risk of forfeiture.
Simon expects to be in a lower tax bracket when he retires. Which of these are correct
statements about the advantages of this arrangement for Simon?
-Deferrals to the plan are not subject to payroll taxes.
-A major advantage of a nonqualified plan is deferral of taxation on income until a later
date.
-Some of the benefits are funded by his employer.
-There is no limit on the amount of compensation that may be contributed to the plan.
A) I and II
B) II and IV
C) III and IV
D) I and III - ✔✔B) II and IV
Module 6-2
✔✔Which statement regarding the funding of buy-sell agreements with life insurance is
correct?
A) The estate of the insured under each policy should also be the primary beneficiary.
B) The owner of each policy should also be the primary beneficiary.
C) The insured under each policy should also be the owner of the policy.
D) The insured, owner, and primary beneficiary of each policy should be the same
person. - ✔✔The owner of each policy should also be the primary beneficiary.
Module 7-6
✔✔Which of these is a responsibility of FINRA?
A) To examine prospectuses for full disclosure regarding the securities offered
B) To review advertising and sales literature of member firms
C) To provide insurance of members' accounts
D) To monitor the trading activities of "insiders" - ✔✔To review advertising and sales
literature of member firms
Module 8-2
✔✔You have arranged to meet with a prospective high net worth client. In order to build
trust with this client, which level of trust is most important to establish first?
A) Technical competence and know-how of the adviser
B) Revelation of fee structure
,C) Ethical conduct and character of the adviser
D) Empathic skills and maturity of the adviser - ✔✔Ethical conduct and character of the
adviser
Module 1-2
✔✔According to the investment pyramid, which one of these sequences is correct in
terms of increasing safety of principal (least to most safety of principal)?
A) Limited partnerships, Treasury securities, high-grade corporate bonds
B) Futures contracts, balanced mutual funds, EE bonds
C) Variable annuities, puts and calls, money market accounts
D) Gold, high-grade municipal bonds, growth mutual funds - ✔✔B) Futures contracts,
balanced mutual funds, EE bonds
Module 2-3
✔✔Which statement regarding hedge funds and their characteristics is the most
accurate?
A) Hedge funds are often as diversified as mutual funds.
B) Hedge funds attempt to beat a benchmark.
C) Hedge funds can use leverage, but are limited to 10 times their asset base.
D) Hedge funds seek to profit from market inefficiencies. - ✔✔D) Hedge funds seek to
profit from market inefficiencies.
Module 3-3
✔✔Georgia has told you, her wealth management adviser, that she is interested in
selling her local chain of six fabric stores, of which she is the sole owner. She doesn't
have any children working in the business, and is considering selling the business to her
management team. She asks you what possible advantages may exist to such a sale.
Which of these options are advantages that you might tell Georgia regarding an insider
sale?
An insider transfer is the quickest way for Georgia to sell her business.
She could realize greater overall income than from a third-party sale or a sale to an
ESOP.
She could structure the deal to ensure that she did not give up control before reaching
her financial security goal.
Her managers are all natural succession owners since they already work in and know
the business.
A) II and III
B) III only
C) I, II, and III
D) II and IV - ✔✔II and III
, An insider transfer is a lengthy process compared to a third-party sale, and is not the
quickest route to exit a business. The insider transfer can lead to greater overall income
from the transaction, but there is less upfront money than other methods. One of the
advantages is the insider sale can be structured so that Georgia does not give up
control until her financial goals are met. Employees oftentimes do not make good
owners, even though they are good at their employee role.
Module 4-6
✔✔Sarah reported an income tax liability of $95,000 (on AGI of $400,000) on her tax
return for the prior year. This year, Sarah expects to have an income tax liability of
$120,000. She also has estimated that the amount of income tax withheld from her
wages will total $85,000. What is the minimum amount of estimated tax payments that
Sarah must pay in equal quarterly installments for this year?
A) $10,000
B) $19,500
C) $23,000
D) $35,000 - ✔✔B) $19,500
For a taxpayer with a prior-year AGI exceeding $150,000, the total amount required to
be withheld is the lesser of 90% of the current year's tax liability, or 110% of the prior
year's tax. 90% of the current year liability is $108,000, and 110% of the prior year's
liability is $104,500. The lesser of these amounts, $104,500, is compared to the actual
withholding of $85,000, to leave $19,500 of required estimated payments.
Module 5-1
✔✔Which statement regarding a qualified plan is correct?
A) The plan may discriminate.
B) Distributions from pension plans are taxed at capital gains rates if contributions have
been in the plan for more than 12 months.
C) The employer's deduction is available in the year that a contribution is made.
D) Certain plans are partially exempt from ERISA requirements. - ✔✔C) The employer's
deduction is available in the year that a contribution is made.
Module 6-1
✔✔Which statement correctly explains an action related to the estate planning objective
of maximizing premortem flexibility?
A) Retaining a closely held business interest in the estate to utilize estate tax valuation
elections
B) Retaining a life insurance policy that is payable to the estate
AND ANSWERS SURE A+
✔✔Ken and Mary are married taxpayers filing a joint tax return. In 2020, they have an
adjusted gross income of $370,000, and their capital gain income (included in the AGI)
is $100,000. They have investment interest expense of $4,000 and state income tax
attributable to the investment income of $2,000. They also have a qualified distribution
from a Roth IRA of $20,000. What is the amount of Medicare contribution tax they must
pay?
A) $3,572
B) $4,560
C) $3,800
D) $4,332 - ✔✔A) $3,572
Ken and Mary will pay a $3,572 Medicare contribution tax (3.8% on $94,000). This is
the lesser of the net investment income ($94,000) or the AGI in excess of the threshold
amount ($370,000 − $250,000, or $120,000). The net investment income is the
investment income of $100,000, reduced by the allowable investment expenses of
$6,000. In this situation, the $94,000 of the net investment income is subject to the
Medicare contribution tax.
Module 5-5
,✔✔Simon recently entered into a pure nonqualified deferred compensation agreement
with his employer. Simon's nonqualified plan benefits are subject to the claims of his
employer's creditors; however, they are not subject to a substantial risk of forfeiture.
Simon expects to be in a lower tax bracket when he retires. Which of these are correct
statements about the advantages of this arrangement for Simon?
-Deferrals to the plan are not subject to payroll taxes.
-A major advantage of a nonqualified plan is deferral of taxation on income until a later
date.
-Some of the benefits are funded by his employer.
-There is no limit on the amount of compensation that may be contributed to the plan.
A) I and II
B) II and IV
C) III and IV
D) I and III - ✔✔B) II and IV
Module 6-2
✔✔Which statement regarding the funding of buy-sell agreements with life insurance is
correct?
A) The estate of the insured under each policy should also be the primary beneficiary.
B) The owner of each policy should also be the primary beneficiary.
C) The insured under each policy should also be the owner of the policy.
D) The insured, owner, and primary beneficiary of each policy should be the same
person. - ✔✔The owner of each policy should also be the primary beneficiary.
Module 7-6
✔✔Which of these is a responsibility of FINRA?
A) To examine prospectuses for full disclosure regarding the securities offered
B) To review advertising and sales literature of member firms
C) To provide insurance of members' accounts
D) To monitor the trading activities of "insiders" - ✔✔To review advertising and sales
literature of member firms
Module 8-2
✔✔You have arranged to meet with a prospective high net worth client. In order to build
trust with this client, which level of trust is most important to establish first?
A) Technical competence and know-how of the adviser
B) Revelation of fee structure
,C) Ethical conduct and character of the adviser
D) Empathic skills and maturity of the adviser - ✔✔Ethical conduct and character of the
adviser
Module 1-2
✔✔According to the investment pyramid, which one of these sequences is correct in
terms of increasing safety of principal (least to most safety of principal)?
A) Limited partnerships, Treasury securities, high-grade corporate bonds
B) Futures contracts, balanced mutual funds, EE bonds
C) Variable annuities, puts and calls, money market accounts
D) Gold, high-grade municipal bonds, growth mutual funds - ✔✔B) Futures contracts,
balanced mutual funds, EE bonds
Module 2-3
✔✔Which statement regarding hedge funds and their characteristics is the most
accurate?
A) Hedge funds are often as diversified as mutual funds.
B) Hedge funds attempt to beat a benchmark.
C) Hedge funds can use leverage, but are limited to 10 times their asset base.
D) Hedge funds seek to profit from market inefficiencies. - ✔✔D) Hedge funds seek to
profit from market inefficiencies.
Module 3-3
✔✔Georgia has told you, her wealth management adviser, that she is interested in
selling her local chain of six fabric stores, of which she is the sole owner. She doesn't
have any children working in the business, and is considering selling the business to her
management team. She asks you what possible advantages may exist to such a sale.
Which of these options are advantages that you might tell Georgia regarding an insider
sale?
An insider transfer is the quickest way for Georgia to sell her business.
She could realize greater overall income than from a third-party sale or a sale to an
ESOP.
She could structure the deal to ensure that she did not give up control before reaching
her financial security goal.
Her managers are all natural succession owners since they already work in and know
the business.
A) II and III
B) III only
C) I, II, and III
D) II and IV - ✔✔II and III
, An insider transfer is a lengthy process compared to a third-party sale, and is not the
quickest route to exit a business. The insider transfer can lead to greater overall income
from the transaction, but there is less upfront money than other methods. One of the
advantages is the insider sale can be structured so that Georgia does not give up
control until her financial goals are met. Employees oftentimes do not make good
owners, even though they are good at their employee role.
Module 4-6
✔✔Sarah reported an income tax liability of $95,000 (on AGI of $400,000) on her tax
return for the prior year. This year, Sarah expects to have an income tax liability of
$120,000. She also has estimated that the amount of income tax withheld from her
wages will total $85,000. What is the minimum amount of estimated tax payments that
Sarah must pay in equal quarterly installments for this year?
A) $10,000
B) $19,500
C) $23,000
D) $35,000 - ✔✔B) $19,500
For a taxpayer with a prior-year AGI exceeding $150,000, the total amount required to
be withheld is the lesser of 90% of the current year's tax liability, or 110% of the prior
year's tax. 90% of the current year liability is $108,000, and 110% of the prior year's
liability is $104,500. The lesser of these amounts, $104,500, is compared to the actual
withholding of $85,000, to leave $19,500 of required estimated payments.
Module 5-1
✔✔Which statement regarding a qualified plan is correct?
A) The plan may discriminate.
B) Distributions from pension plans are taxed at capital gains rates if contributions have
been in the plan for more than 12 months.
C) The employer's deduction is available in the year that a contribution is made.
D) Certain plans are partially exempt from ERISA requirements. - ✔✔C) The employer's
deduction is available in the year that a contribution is made.
Module 6-1
✔✔Which statement correctly explains an action related to the estate planning objective
of maximizing premortem flexibility?
A) Retaining a closely held business interest in the estate to utilize estate tax valuation
elections
B) Retaining a life insurance policy that is payable to the estate
