AAMS Study Set Questions with Verified
Correct Answers
James has owned a variable annuity for 12 years. The entire balance is invested in
equity subaccounts. This past year, the value of his annuity increased by $20,000 as a
result of earnings within the subaccounts. The $20,000 in earnings
A)
taxable as a long-term capital gain this year.
B)
taxable as a short-term capital gain this year.
C)
not taxable this year.
D)
taxable as ordinary income this year.
C.
Earnings in a variable annuity grow on a tax-deferred basis and are taxed only when paid out
from the annuity.
Income from a Treasury bond is exempt from
A)
federal, state, and local taxation.
,B)
state and local taxation.
C)
federal and local taxation.
D)
federal taxation.
B.
A Treasury bond pays interest that is exempt from state and local taxation.
One of your clients is interested in investing in a real estate limited partnership. He has
heard of the tax law requirements limiting the use of passive activity losses in sheltering
other income. What can you tell him about these requirements with respect to the real
estate limited partnership?
A)
A limited partner's participation is strictly "passive."
B)
Passive activity losses can be used to shelter earned income from other sources.
C)
Tax rules governing active and passive income do not apply to real estate.
D)
If he is active in monitoring the real estate market, he can avoid the passive loss rules.
A. Limited partners are considered passive investors who provide most of the capital for a
project.
, A return of capital dividend from a stock
A)
is taxed as a capital gain.
B)
is taxed at a flat rate of 25%.
C)
is taxed at ordinary income tax rates.
D)
reduces the investor's basis in the stock.
D.
Based on the 2008 Aon Consulting Worldwide study, a client with a preretirement
income of $90,000 will need approximately how much income during retirement?
A)
$45,000
B)
$69,300
C)
$70,200
D)
$76,500
C.
Correct Answers
James has owned a variable annuity for 12 years. The entire balance is invested in
equity subaccounts. This past year, the value of his annuity increased by $20,000 as a
result of earnings within the subaccounts. The $20,000 in earnings
A)
taxable as a long-term capital gain this year.
B)
taxable as a short-term capital gain this year.
C)
not taxable this year.
D)
taxable as ordinary income this year.
C.
Earnings in a variable annuity grow on a tax-deferred basis and are taxed only when paid out
from the annuity.
Income from a Treasury bond is exempt from
A)
federal, state, and local taxation.
,B)
state and local taxation.
C)
federal and local taxation.
D)
federal taxation.
B.
A Treasury bond pays interest that is exempt from state and local taxation.
One of your clients is interested in investing in a real estate limited partnership. He has
heard of the tax law requirements limiting the use of passive activity losses in sheltering
other income. What can you tell him about these requirements with respect to the real
estate limited partnership?
A)
A limited partner's participation is strictly "passive."
B)
Passive activity losses can be used to shelter earned income from other sources.
C)
Tax rules governing active and passive income do not apply to real estate.
D)
If he is active in monitoring the real estate market, he can avoid the passive loss rules.
A. Limited partners are considered passive investors who provide most of the capital for a
project.
, A return of capital dividend from a stock
A)
is taxed as a capital gain.
B)
is taxed at a flat rate of 25%.
C)
is taxed at ordinary income tax rates.
D)
reduces the investor's basis in the stock.
D.
Based on the 2008 Aon Consulting Worldwide study, a client with a preretirement
income of $90,000 will need approximately how much income during retirement?
A)
$45,000
B)
$69,300
C)
$70,200
D)
$76,500
C.
