AFIP AFIP Taxation and Estate Planning in F&I 3

Question 1

Which tax form must dealers file with the IRS when a customer pays more than $10,000 in cash for a vehicle?

Accepted Answer

Form 8300

Answer

IRS Form 8300 must be filed within 15 days when a business receives more than $10,000 in cash in a single transaction to help identify potential money laundering.

Question 2

When a lender cancels a portion of a customer's auto loan (e.g., after repossession), the canceled amount is reported to the borrower on which IRS form?

Accepted Answer

Form 1099-C

Answer

Form 1099-C (Cancellation of Debt) reports forgiven debt to the IRS, and the canceled amount is generally taxable income to the borrower.

Question 3

In estate planning, a 'durable power of attorney for finances' authorizes:

Accepted Answer

A designated agent to manage financial affairs if the principal becomes incapacitated

Answer

A durable power of attorney for finances remains effective even if the principal becomes mentally incapacitated, allowing the agent to handle banking, bill payment, and financial decisions.

Question 4

Which of the following best describes a 'luxury vehicle tax' limitation under IRS rules for business vehicles?

Accepted Answer

Annual depreciation caps that limit how much of a passenger automobile's cost can be deducted for business use

Answer

The IRS imposes annual depreciation limits on passenger automobiles used for business, often called 'luxury auto caps,' regardless of the vehicle's actual cost.

Question 5

A customer wants to leave their vehicle to a minor child. From an estate planning perspective, what is the most important consideration?

Accepted Answer

That a minor cannot legally own titled property and a custodian or trust must be designated

Answer

Minors cannot hold title to property in most states, so a custodian under UTMA/UGMA or a trust must be named to manage the asset until the child reaches majority.

(AFIP) Certified Association of Finance & Insurance Professionals Practice Test

(AFIP) Certified Association of Finance & Insurance Professionals Practice Test

AFIP AFIP Taxation and Estate Planning in F&I 3