Free SERIES 7 Exam Braindumps (page: 45)

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Crossover is best defined as:

  1. the point at which the program becomes profitable
  2. the point at which income exceeds deductions
  3. the fact that there are more general partners than limited partners
  4. the profit of limited partners exceeding profit of general partners

Answer(s): B

Explanation:

the point at which income exceeds deductions. This is the definition of “crossover”.



Which of the following pairs of corporation characteristics are easiest for a partnership to avoid?

  1. business objective and centralized management
  2. continuity of life of the business and limited liability
  3. two or more associates and free transferability of assets
  4. continuity of life of the business and transferability of assets

Answer(s): D

Explanation:

continuity of life of the business and transferability of assets. Partnerships may seek to avoid continuance of the business life and asset transfer. The other choices are too important for partnerships to sacrifice.



Which of the following best describes depreciation?

  1. a tax credit available to investors in heavy equipment
  2. deductions from gross income to offset lower value of equipment
  3. return of principal from real estate investments
  4. capitalized and amortized maintenance costs

Answer(s): B

Explanation:

deductions from gross income to offset lower value of equipment. The cost of equipment is deducted from gross income over the life of the equipment, as its value declines.



On which of the following is depreciation permitted?

  1. rental property whose value is declining
  2. residential property not used for business
  3. property whose maintenance exceeds the investment credit
  4. equipment subject to recapture

Answer(s): B

Explanation:

residential property not used for business. Depreciation is only permitted on income-producing property.






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