Series-6 Investment Company and Variable Contracts Products Representative Qualification Examination (IR) - Practice Questions

Question 10

Joan is a customer of GetErDone Broker-Dealers. Her twin sister, Jean, has accompanied her to GetErDone’s office and has gathered some information regarding opening an account with the firm, giving it her contact information at the same time.

Under Regulation S-P, which of the following statements regarding GetErDone’s handling of Joan’s and Jean’s personal information is true?

Select an option, then click Submit answer.

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GetErDone must provide Joan with a notification of its privacy policies annually and provide her with information on how to mandate that it not share her nonpublic personal information with nonaffiliated third parties.
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GetErDone can disclose any information that Jean provided them to nonaffiliated third parties since Jean is not a customer of the broker-dealer.
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GetErDone is required to have provided Jean with a copy of its privacy policy when she inquired about opening an account with the broker-dealer.
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All of the above are true statements.

Question 11

Jake’s Uncle Zeke gave Jake and his new bride 100 shares of the stock of Southwest Airlines (LUV) when they got married. Uncle Zeke had paid $16.60 for the stock several years earlier, but it was selling for only $12.10 on the day of the wedding. Jake and his bride are unimpressed with the stock’s performance a few months later and decide to sell it for $11.00, its market price at that point.

What are the tax consequences of the sale for the newly wedded couple?

Select an option, then click Submit answer.

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Jake and his bride will have a long-term capital loss of $110 to offset other income.
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Jake and his bride will have a long-term capital loss of $560 to offset other income.
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Jake and his bride will have a short-term capital loss of $560 to offset other income.
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Jake and his bride will have neither a taxable gain nor a capital loss to declare.

Reference / correct answer:

Jake and his bride will have a long-term capital loss of $110 to offset other income.

If Jake and his bride sell the stock of LUV for $11.00 when it was selling for $12.10 on the day that they received it, they will have a long-term capital loss of $110 to offset other income. In this situation, the relevant cost basis is the value of LUV on the day of the wedding. Therefore, the loss is calculated as ($11 - $12.10) x 100 = -$110. The holding period is based on the holding period of the donor, so the loss is considered to be a long-term capital loss. In a gift situation, there are two cost bases. In the case of an asset that has depreciated in value, as in this instance, if the recipient sells the gifted property for less than its market value on the day he received it, the cost basis is considered to be the market price on the day the gift was received. If, on the other hand, the property has appreciated in value and the gift recipient sells the gifted property for more than the cost basis of the donor, then his gain is based on the cost basis of the donor, not the price at which the property was selling on the day the gift was received. If the selling price is somewhere between the two values, there is neither a taxable gain nor a taxable loss for the gift recipient to declare.

Question 12

On Monday, August 2nd, the Board of Directors of Baldor Electric (BEZ) announced that the firm would pay a dividend of $0.17 a share. Payment will be made on Friday, October 8th to shareholders of record as of Friday, September 17th.

In order to receive this dividend check, an investor would have to purchase shares of Baldor Electric before which day?

Select an option, then click Submit answer.

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Monday, August 2nd.
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Wednesday, September 15th.
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Friday, September 17th.
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Friday, October 8th.

Series-6 – Investment Company and Variable Contracts Products Representative Qualification Examination (IR)