QUESTION: 149

A person's discretionary income is:

the amount that can be allocated to speculative investments.
his income after tax.
the income that he has left to spend or save after having paid taxes on the income and for all of the necessities, e.g., housing, food, clothing, transportation, utilities, etc.
the amount of his income that is needed to pay his regular monthly bills, e.g., rent, food, gasoline, utilities, health insurance, etc.

Answer(s): C

Explanation:

A person's discretionary income is the income that he has left to spend or save after having paid taxes on the income and for all of the necessities, e.g., housing food, clothing, transportation, utilities, etc. His income after tax is referred to as his disposable income.

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QUESTION: 150

Joel has a 28-year-old client who has been promoted to the elevated position of senior software engineer with a large, well-known, software company at her relatively young age. She has come to Joel for investment advice, explaining to him that she is risk-averse, having been influenced by parents who grew up in a foreign country and had little, prior to immigrating to America and working hard to achieve their dreams for themselves and their children. She has $50,000 that she wants him to invest for her, and her primary goal is to be able to have enough money, beyond what she expects to have in her employer's retirement program, to return to her home country and help others achieve their dreams. Joel explains to her that she may have to invest in riskier securities in order to achieve her goal, but his client is adamant that she wants her portfolio to be invested to target growth with the least risk exposure possible. Given the facts:

Joel should divide his client's monies among growth, aggressive growth, and foreign stock funds. Regardless of what she says, she has a long investment horizon and can afford to take on more risk.
Joel should invest his client's monies in a fund that specializes in stocks of his client's home country to avoid the exchange rate risk that she will be exposed to when she returns.
Joel should invest his client's monies in a U.S. government bond fund since she is risk- averse.
Joel should invest his client's monies in a growth fund to target her growth objective.

Answer(s): D

Explanation:

Because Joel's client is adamant about being risk-averse, but also desires growth, Joel should invest his client's monies in a growth fund to target her desired objective. He should avoid the riskier aggressive growth and foreign stock funds. Although her long-term investment horizon indicates that she is able to tolerate more risk, her desires trump that. Investing in stocks of her home country doesn't make sense at this point since no one knows what the future exchange rate will be. Investing in a U.S. government bond fund has less risk, but does not target her growth objective.

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QUESTION: 151

Under current tax law, in order for the profits from the sale of any investment to be considered long -term capital gain income, the investment must have been held for:

longer than 6 months.
longer than 12 months.
longer than 18 months.
longer than 24 months.

Answer(s): B

Explanation:

Under current tax law, in order for the profits from the sale of any investment to be considered long-term capital gain income, the investment must have been held for longer than 12 months.

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QUESTION: 152

Sarah Slick is kicking herself for having bought the stock of Bounce, Inc.at a higher price than she needed to have paid. She bought it at $50 a share on November 20th and watched its price drop during December.
Ms. Slick is confident that Bounce's stock price will bounce back (pun intended), but she decides that in the meantime, she will sell her shares and use the realized capital loss to offset some of the capital gains she has realized on other investments during the year. Thus, on December 30th, she sells her shares of Bounce for $40 a share. During the first couple weeks of the new year, Sarah observes Bounce's price creeping upward, and she buys the same number of shares she previously sold for $45 a share on January 18th.
Given this scenario, which of the following statements is true?

The SEC may file civil charges against Sarah for engaging in an illegal "wash sale."
Because Sarah waited the requisite 30 days after purchase before selling her shares in Bounce, she can deduct her realized capital loss of $10 a share when calculating her taxes for that tax year.
Because Sarah did not wait the requisite 30 days after her sale of Bounce shares to repurchase them, she cannot deduct her realized capital loss of $10 a share when calculating her taxes for that tax year.
Although Sarah did not wait the requisite 30 days after her sale of Bounce shares to repurchase them, she can still deduct her realized capital loss of $10 a share when calculating her taxes for that tax year since her repurchase of the shares didn't occur until the following tax year.

Answer(s): C

Explanation:

If Sarah repurchases Bounce Stock on January 18th for $45 a share after selling it on December 30th for $40 a share, she did not wait the requisite 30 days after her sale of Bounce shares to repurchase them and cannot deduct her realized capital loss of $10 a share when calculating her taxes for that tax year. It doesn't matter that the repurchase occurred in the next tax year or that she waited the requisite number of days after she purchased the shares before selling them. This is not an example of an illegal "wash sale," so the SEC won't be filing any charges against Sarah.

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Free Series 6 Exam Braindumps (page: 38)

QUESTION: 149

Explanation:

QUESTION: 150

Explanation:

QUESTION: 151

Explanation:

QUESTION: 152

Explanation: