Mixed Deck — All CAP Topics Flashcards

When a CAP advisor becomes aware that a client's planned gift may be used by a nonprofit in ways that conflict with the client's stated values, the advisor should:

Answer: Proactively advise the client of the concern, ensure they have full information, and respect their decision after informed deliberation

The advisor's duty includes ensuring the client has complete and accurate information relevant to their philanthropic decisions—including potential conflicts with their own values—before completing any transaction.

A newly widowed client contacts their CAP advisor wanting to immediately restructure all charitable giving as a tribute to their late spouse. The advisor's best immediate action is to:

Answer: Gently encourage a period of reflection before making major irrevocable decisions

Encouraging reflection before irrevocable decisions protects the client's long-term interests while honoring the emotional significance of the moment.

A charity's Form 990 shows that executive compensation represents 80% of total expenses. What concern does this raise?

Answer: Excessive compensation may indicate misuse of charitable assets

When compensation dominates expenses, very little funding reaches program beneficiaries, signaling potential mismanagement or self-dealing.

What is an essential step in nonprofit impact evaluation?

Answer: Collecting and analyzing program outcome data

An essential step in nonprofit impact evaluation is collecting and analyzing program outcome data. This systematic process helps determine if programs are achieving their intended goals and making a real difference. The data provides evidence of effectiveness, informs program improvements, and demonstrates accountability to donors and stakeholders.

When advising a client on philanthropic legacy planning, which element is most essential to address according to CAP curriculum?

Answer: Articulating the donor's philanthropic identity, values, and vision for impact beyond their lifetime

CAP curriculum prioritizes the articulation of philanthropic identity—who the donor is, what they care about, and what legacy they want to create—as the foundation for all technical planning decisions.

The concept of 'abandonment' in property insurance claims means the insured:

Answer: Surrenders the damaged property to the insurer in exchange for full policy limits

Abandonment occurs when the insured attempts to transfer title of damaged property to the insurer and demand total loss payment; most policies explicitly prohibit this without insurer consent.

What is the AGI deduction limit for a cash gift to a public charity by an individual donor under the standard charitable deduction rules?

Answer: 60% of AGI

Under current law (post-TCJA), cash contributions to public charities by individuals are deductible up to 60% of adjusted gross income.

In estate planning, what does 'step-up in basis' mean for inherited assets?

Answer: The heir's cost basis is reset to the fair market value at the decedent's date of death

Inherited assets receive a stepped-up basis equal to the fair market value on the date of death, eliminating capital gains tax on pre-death appreciation.

A Special Investigations Unit (SIU) is most likely to be activated when a claim exhibits which of the following characteristics?

Answer: Multiple prior claims for the same type of loss within a short period

A pattern of similar prior losses is a classic fraud indicator that triggers SIU referral for deeper investigation beyond routine claim handling.

An 'absolute return' strategy in endowment investing aims to:

Answer: Generate positive returns regardless of overall market direction

Absolute return strategies seek positive returns in all market environments using diverse, uncorrelated approaches, helping endowments reduce volatility and protect capital during market downturns.

A CAP advisor who receives a referral fee from a charitable organization for recommending clients to that organization should:

Answer: Disclose the fee arrangement fully to the client and consider whether it creates a conflict that compromises the recommendation

Full disclosure of any referral fees or compensation arrangements is required; the advisor must also evaluate whether the conflict can be adequately managed or requires declining the arrangement.

The sociological imagination applied to philanthropic advising means helping donors understand:

Answer: How their personal philanthropic decisions are shaped by and contribute to broader social structures and historical forces

Applied to philanthropy, the sociological imagination helps donors see how their personal wealth and giving impulses are connected to systemic social forces, informing more thoughtful and systemic giving strategies.

A state passes a charitable solicitation law requiring all nonprofits to register before fundraising. This type of policy is primarily designed to:

Answer: Protect donors from fraudulent solicitations

Charitable solicitation registration laws protect the public by ensuring fundraising organizations are legitimate and accountable.

Which type of organization is required to file Form 990-N (e-Postcard) rather than a full Form 990?

Answer: Public charities with gross receipts normally $50,000 or less

Small tax-exempt organizations whose annual gross receipts are normally $50,000 or less may satisfy their annual reporting requirement by filing the simple Form 990-N electronic postcard rather than a full Form 990.

What is the annual federal gift tax exclusion amount per recipient for 2024?

Answer: $18,000

For 2024, the annual gift tax exclusion is $18,000 per donor per recipient, allowing tax-free transfers up to that amount without reducing the lifetime exemption.

What distinguishes a Charitable Remainder Unitrust (CRUT) from a Charitable Remainder Annuity Trust (CRAT)?

Answer: A CRUT pays a fixed percentage of annually revalued assets; a CRAT pays a fixed dollar amount

A CRUT pays a fixed percentage of the trust's annually revalued assets (so income fluctuates), while a CRAT pays a fixed dollar annuity regardless of trust performance.

What is the benefit of hosting fundraising events?

Answer: They engage donors and raise awareness

Fundraising events offer multiple benefits beyond just raising money. They provide valuable opportunities to engage current and potential donors, allowing them to connect with the organization's mission and staff. Events also significantly raise public awareness about the cause, attracting new supporters and fostering community involvement.

Research on gender differences in philanthropic behavior generally finds that women donors:

Answer: Are more likely than men to give because of values alignment and relationship to cause, and to volunteer alongside their giving

Studies by the Women's Philanthropy Institute at Indiana University consistently find that women are more values-driven and relationship-oriented in their giving than men, and more likely to combine giving with volunteering and board service.

A nonprofit that engages in private benefit transactions for the benefit of a non-charitable class risks which IRS consequence?

Answer: Revocation of tax-exempt status under IRC 501(c)(3)

Under IRC 501(c)(3), an organization must operate exclusively for exempt purposes; serving private interests beyond incidental benefit is grounds for revocation of tax-exempt status.

A donor-advised fund sponsor must exercise which control over DAF assets after the donor's contribution?

Answer: The sponsor has exclusive legal control over DAF assets and must independently evaluate grant recommendations

The DAF sponsor (public charity) has exclusive legal control over contributed assets; it evaluates donor grant recommendations and may reject those that do not satisfy charitable purposes—this control is what makes the donor's contribution irrevocable and immediately deductible.