Learning Objectives After reading Chapter 1, participants will able to: 1. Match short-term financial goals with the four generic investment purposes stating the planning purpose of this process, recognize the importance of defining, listing and prioritizing realistic goals, and show how investing allocation changes with age. 2. Identify the tax consequences of title holding methods by: a. Listing nine basic ways to hold title to assets starting with the simplest and most direct way to hold property; b. Naming the tax benefits and drawbacks of co-tenancies, corporations (both C & S), partnerships, qualified retirement plans, and trusts particularly as they relate to a client's after-tax investment return; and c. Defining custodianship describing the two uniform acts and stating how an estate can be tax beneficial to taxpayers. 3. Recognize the postponement of retirement planning noting the importance of early planning using the author's suggested five step process, define a balance sheet method to plan retirement, show how to diversify portfolios by balancing liquid and nonliquid assets, and state the purpose of savings naming ten strategies to save. After reading Chapter 2, participants will able to: 1. Name three goals of money management listing four types of income, identify three causes of increased taxable income for itemizing taxpayers, and state at least eight types of taxable income and their proper reporting. 2. Show the distinctions between tax-free municipal bonds from fringe benefits in generating tax-free income, name two benefits of tax deferral, and identify at least one tax-deferred investment permitting taxpayers to better invest for retirement. 3. List several ways to shelter income noting how income sheltering amplifies investment return. 4. Recognize the budgeting of income into cash by containing expenditures with the author's six step process and developing discretionary income using four important variables, identify a client s negative outlook on budgeting and counter with five strategies, show how to convert income into assets by purchasing investments, and list six important asset acquisition rules for improved investment return. 5. Name at least eight major tax-advantage investments using six basic management rules, and state the economic impact of accelerating deductions, postponing tax liability, and leveraging. After reading Chapter 3, participants will able to: 1. Recognize spending habits and show how to design a budget to increase discretionary income, define net worth using a balance sheet, identify an asset inventory listing liabilities, and state where changes could be made to meet financial goals. 2. State why individuals should take primary responsibility for the investment planning including necessary self-education, show the allocation of financial resources among
investments to maximize return, and recognize the impact of inflation, risk versus return, and basic income tax planning tactics that can be used by clients to minimize taxes. After reading Chapter 4, participants will able to: 1. Name two benefits of tax deferral, outline the former use of tax deferral under 1034, and state the tax deferral advantage under 1031 listing its three elements. 2. List the related party 1031 restrictions identifying prohibited parties or entities and permissible disposition exceptions, state recommendations for the protection of exchange participants, and outline the history of the personal and multiple property regulations naming the unique personal property like-kind and netting requirements for multiple asset exchanges. 3. Outline the evolution of 1031 delayed exchanges identifying allowable transfers, show how to select replacement property within statutory deadlines, name four constructive receipt safe harbors, list methods to secure exchange party performance, and define the 1031 partnership underlying asset rule. Recognize how to design retirement plans following four basic steps, name two of the most popular methods for providing for retirement, and define near retirement investments. 4. State three requirements for an installment, show how to elect out of the installment method, list at least five variables affecting 453 availability. Illustrate how to use a property option to receive income and postpone tax. After reading Chapter 5, participants will be able to: 1. Name at least six tax saving credits identifying qualified computational expenses and stating their limitations and restrictions. 2. Outline the estimated tax rules and procedures including the four payment deadlines and underpayment penalties and noting the economics of overpaying estimated taxes. Recognize the deductibility of investment interest, prepaid interest, points, and prepayment penalties noting the offset of passive income with rental property mortgage interest. 3. Identify business vehicle operating costs using (or switching between) the actual cost method or the standard mileage rate and allocating expenses based on 162 usage, state the importance of retaining substantiatable expense and mileage records, and name five depreciation traps when purchasing a vehicle. 4. List three requirements for business expenses to meet the directly related test, explain the elements of the associated test, identify the nine business expense statutory exceptions, and state the application of R.R. 90-23 and R.R. 99-7 to the deduction of transportation costs to a temporary work location. 5. Recognize business asset depreciation using both ACRS and MACRS recovery classes, identify three sources of 172 net operating losses (NOLs) noting carryback and carryover rules, name several tax breaks for nonitemizing taxpayers, state the advisability of filing an amended return, show how to avoid audits by claiming refunds for provable items, and list which return amendments are safest. After studying the materials in Chapter 5, answer the exam questions 44 to 57.
After reading Chapter 6, participants will able to: 1. List six formats for income splitting, define the tax treatment of employee and selfemployed business expenses particularly home-office expenses noting the two nonexclusive use exceptions and the income limitation, name changes made to home office deduction under TRA 97, and recognize the ability of self-employeds to make annual deductible contributions to a Keogh plan. 2. Identify the tax opportunities available to an unincorporated business by specifically recognizing retirement plans, the hiring of family members, travel expenses, casualty losses, bad debts, and self-employment tax. 3. State the uses and tax characteristics of regular and S corporations by: a. Naming at least six circumstances when incorporation is desirable, b. Defining the taxation of these entities including their ability to split income; and c. Listing initial 351 formation and capitalization issues and identifying appropriate tax form filings for each entity. 4. Recognize the use of partnerships to split income among partners specifically including the use of 704(e) family partnerships and the consequences of gifting a partnership interest to a child or to another family member. 5. Identify the use of a custodianship to split income and contain the kiddie tax listing three initial planning considerations and four examples of good investments for children, list deductions and credits for childcare, education, children, and 7872 loans, and state the income and later estate tax benefits of gifts. After reading Chapter 7, participants will able to: 1. Identify tax elimination techniques by: a. Defining the current 121 home sale exclusion noting its differences with prior tax law; b. Listing qualifications for tax-free state or local obligations specifically including private activity bonds; and c. Stating the tax elimination aspects of family transactions such as gifts, bequests, inheritances, life insurance, and even divorce. 2. Recognize employer deductions as a means to increase tax-free incentive-based compensation for employees by: a. Naming at least eight rules for excluding fringe benefits under 132 and their proper reporting on the W-2; and b. Defining popular employee fringe benefits including employer paid accident & health coverage, meals or lodging, cafeteria plan benefits, 127 education assistance, achievement awards, group life insurance and dependent care assistance. 3. Identify how to value fringe benefits according to IRS regulations, show how to comply with ERISA requirements, state the proper reporting of reimbursed and unreimbursed business expenses under accountable and nonaccountable plans, define substantiation of
auto expenses using a fixed and variable rate, and list eligible retirement benefits exempt from social security taxes. After reading Chapter 8, participants will be able to: 1. Show the goals and purposes of asset protection and identifying the objections some people have about shielding assets from creditors by: a. Listing at least six reasons for asset protection and stating sixteen situations that can unexpectedly put assets and financial security at stake; b. Identifying eighteen common sources of lawsuits and defining the author's concept of exploding and imploding liability; and c. Illustrating asset protection using the primary concepts of insurance, asset placement and statutory protections. 2. State the importance of the three types of creditors associated with asset protection and fraudulent transfers. 3. Outline the fraudulent transfer laws listing several badges of fraud, clarify statute of limitations and criminal penalties, and differentiate permissible asset transfers. 4. Recognize the degree and necessity of asset protection by defining net worth using a balance sheet and stating asset values in the preparation of a balance sheet. 5. Identify the ways that insurance and buy-sell agreements can offer asset protection by: a. Listing the asset protection elements of homeowner's, automobile and disability insurance; b. Naming the four parties under a life insurance contract listing potential reasons for establishing an irrevocable life insurance trust; and c. Defining entity purchase and cross purchase buy sell agreements. 6. Recognize the asset protection advantages and disadvantages of ownership formats and entities by: a. Showing the use of individual ownership and corporate ownership in an asset protection plan including the importance of S corporations and their estate tax planning advantages; b. Identifying testamentary trusts, living trusts and at least eight subcategories of trusts pointing out asset protection elements; c. Naming the various types of co-tenancy listing their asset protection dangers, stating several types of partnerships and showing their variation from limited liability companies; and d. Recognizing the unique asset protection qualities of retirement plans, custodianship, and estates as an asset protection tools. 7. Identify three formats that courts typically follow if a couple does not have an enforceable premarital agreement, and define post-nuptial and premarital agreements showing how they relate to divorce settlements and divisions. After reading Chapter 9, participants will able to: 1. List the three basic elements of estate planning and state for clients where changes may be necessary in designing such a plan, and recognize the importance of well-drafted legal
documents and show how to go about drafting them. Name the key participants in an estate planning team and in estate administration and define their roles in estate planning. 2. Outline the probate process to guide clients through an average probate, and identify ways to transfer property or money outside the probate system or by using a trust. Name at least sixteen estate planning techniques and devices that can be used to pass more wealth to survivors and save death taxes while retaining maximum control where possible. Outline estate-planning facts into three categories in order to develop the foundation of an estate plan. After reading Chapter 10, participants will be able to: 1. List the eight potential death taxes noting the federal estate tax as it applies to various size estates, identify two principal taxes that impact how individuals are taxed at death, and state the expiration of the state death tax credit. 2. Define taxable estate under 2501 and identify what assets are included in a gross estate by listing the four basic categories of property and transfers. 3. Name four estate deductions allowed under federal estate tax law and list their tax advantages and disadvantages. 4. Identify the value of a decedent s assets noting advantages of permitted elections, show the use of the Form 706 to pay any estate tax due, recognize the tax basis of estate assets and show how common transactions affect property basis under 1014. 5. State the advantages of gift planning including estate reduction but warning as to the GST, list the steps to compute gift tax identifying the gift tax exclusion amount, and state the value of different types of gifts including split gifting for spouses. 6. Identify the various gift tax exclusions, define the treatment of below-market loans, list the gift tax marital deduction requirements, recognize the tax consequences of giving various assets listing five factors to consider when gifting, and show the use of the Form 709 to compute and pay federal gift tax. After reading Chapter 11, participants will be able to: 1. Define four types of wills listing at least five functions a will can perform, identify at least four types of bequests, list the duties of executors and guardians, and name four ways to hold title describing their tax ramifications. 2. List several advantages of a properly drafted will, define the distribution flow of simple wills, and recognize the pros and cons of probate proceedings. After reading Chapter 12, participants will be able to: 1. Define the four party relationship of a trust, name at least eight reasons to establish a trust, and list eight types of trusts stating their estate planning function. 2. List seven recommended living trust provisions identifying the application of gift and income tax considering the grantor trust and unlimited marital deduction rules, and define A-B and A-B-C trust formats.
After reading Chapter 13, participants will be able to: 1. Name nine basic tax and legal title formats, showing the advantages and disadvantages of holding property in a sole proprietorship, a corporation, or an S corporation, and how to avoid associated title pitfalls. 2. Identify the title holding benefits of trusts, co-tenancy, partnerships, and limited liability companies and the tax characteristics of each. List three types of retirement plans used to provide lifetime benefits to a business owner and to employees, and state the tax treatment of custodianships and a probate estate. After reading Chapter 14, participants will be able to: 1. Name the four different persons in which rights are placed by life insurance and list at least five reasons to purchase life insurance. 2. Recognize the tax treatment of life insurance proceeds by: a. Identifying their normal tax treatment including premiums for personally owned life insurance and lifetime benefits and listing several exceptions particularly the transfer for value rule; b. Naming at least three variables that influence whether life insurance is taxable for federal estate tax purposes; and c. Stating the gift tax associated with transfers of life insurance policies. 3. List the pros and cons of seven types of life insurance policies (and their variations) to help clients choose a suitable policy. State reasons for establishing an irrevocable life insurance trust in order to achieve several estate tax planning advantages. 4. Recognize the differences between deferred annuities and private annuities that assist the estate-planning process and define an entity purchase agreement and a cross purchase agreement noting tax and legal advantages. After reading Chapter 15, participants will be able to: 1. Name three reasons why a business interest must be valued in an estate that is subject to federal estate tax, list eight factors used to determine the net value of a business under the regulations, and state the eight valuation factors in R.R. 59-60 and their impact. 2. Show how tangible assets are normally valued identifying those assets whose valuation is based on values other than book value, and list the four steps in R.R. 68-609 s valuation formula for intangible assets and the effect such amount can have on the total value of a business. 3. Recognize special business valuation issues and redemptions under 303 by: a. Defining the repealed qualified family-owned business estate tax deduction; b. Listing the terms of the election that allows clients to exclude from their taxable estate 40% of the value of land subject to a qualified conservation easement; c. Identifying the value of a minority stock and fractional interests to obtain applicable valuation discounts, and
d. Defining the 303 exception to the dividend treatment of redemptions and showing how to qualify. 4. Identify the tax consequences and issues in leaving an estate to a surviving spouse, list the basic elements of buy sell agreements, stock redemptions, and stock recapitalizations in order to dispose of business interests before death, and define deferred compensation agreements and their impact on estate planning. After reading Chapter 16, participants will be able to: 1. List the benefits of an estate freeze and its ability to reduce the value of a business interest, name four types transactions to which Chapter 14 rules apply, define terminology used in the Chapter 14 valuation rule that applies to corporations and partnerships, and list three exceptions to 2701. 2. Identify the zero value rule under 2701 by: a. Defining the qualified payment exception and the consequence of being excepted; b. Listing at least three variables that impact the application of 2701 and showing how to avoid taxable events when valuing a distribution right; c. Recognizing the transfer tax when a taxpayer fails to make a qualified payment on time noting the election into or out of qualified payment treatment when appropriate; and d. Defining a junior equity interest according to 2701 rules and stating the value of other rights held together with an extraordinary payment right 3. Identify the application of 2701 provisions by: a. Recognizing the treatment of a capital contribution, a redemption, or a recapitalization under 2701; b. Showing when an individual is deemed the owner of an interest that is held indirectly through a corporation, partnership, trust or other entity based on the 2701 attribution rules; c. Stating when transfer tax adjustments will be made to transfers or inclusions in the gross estate; d. Illustrating how to split an applicable retained interest allowing value to be given to a participating feature of a participating preferred interest; and e. Defining the three-step computation using the subtraction method to determine an amount of a gift resulting from a transfer to which 2701 applies. 4. State the terms used in 2702 concerning transfers of interests in trust, show the application of the zero value rule to a transfer of interest in trust, and list three exceptions to 2702. Identify a transfer of an interest in property when there is one or more term interests as a transfer of an interest in a trust, and state the treatment of joint purchases. 5. Recognize the requirements and exceptions of 2703 to insure property is valued appropriately, and identify lapses as a transfer by gift or as includible in the decedent s gross estate under 2704 when applicable. Define the key terminology of 2704 for purposes of the evaluation rules, and state the amount of the transfer noting which lapses or restrictions qualify as an applicable restriction.
After reading Chapter 17, participants will be able to: 1. Recognize estate management techniques for the elderly and disabled by: a. Identifying joint tenancy and the benefits and drawbacks of using such a method for asset management; b. Listing at least three levels of conservatorship that can influence management and protection of an estate and/or personal care and naming five disadvantages of this tool; and c. Defining a durable power and listing six advantages of establishing a revocable living trust as a way to manage assets in an estate. 2. State the basic eldercare benefits of Medicare, Medicaid, and Supplemental Security Income, identify several disadvantages of the Medicaid program and show how to determine income noting three separate asset groups, list the dangers and benefits of gifting to family members, and illustrate how individuals can use private insurance as a short-term solution for catastrophic illness. 3. List three tools that can allow patients to refuse treatment even when incompetent, explain Supplemental Security Income and show how it relates to elderly and disability planning, and state the requirements that must be met in order to receive disability benefits. After reading Chapter 18, participants will be able to: 1. Illustrate post-mortem estate planning in the face of funeral and administrative expenses by using elections and disclaimers. 2. Identify the due dates of three federal forms, define the filing requirements of the decedent s estate tax form, and name three exceptions to the general rule of estate tax payment. 3. State the processes and procedures necessary to the preparation and timely filing of the Form 706. 4. Recognize the filing requirements for estate income tax returns and for the decedent s final income tax return by: a. Showing the estate income tax using any of the available tax accounting methods and tax years to reduce tax liability; and b. Stating the use of a Form 1310 for the decedent or a joint return for the decedent and the surviving spouse. 5. Define the totality of income be included on the decedent s final income tax return using any available exemptions or deductions. 6. Show how to avoid penalties by timely filing a gift tax return, recognize gift splitting to reduce gift taxes, and list eight special gift applications and traps together with ways to avoid their tax consequences.