Missed Questions

Question 1

How is ‘ER match in form of ‘ER securities taxed?

Answer 1

• can qualify for NUA
• taxable as ordinary at distribution
• LTCG at sale if NUA

Question 2

do you need to disclose 2nd DUI conviction of Board is deciding whether to suspend or revoke?

Answer 2

Yes; disclose anything that might impact client’s decision to engage

Question 3

who receives proceeds if decedent dies while life insurance policy was pledged as collateral for a loan?

what are the tax implications?

Answer 3

• Lender gets loan repayment amount and no tax implication
• beneficiaries get remainder

Question 4

what does each value stand for in 300/500/250 for insurance?

Answer 4

bodily injury per person/
bodily injury per accident/
property damage

Question 5

who is responsible for ensuring RMDs are taken?

Answer 5

planner and client

Question 6

in what step of the financial planning process would a CFP create a statement of financial position?

Answer 6

Step 3: Analyze

Question 7

are funds held in a university’s 457 subject to creditors of ERs or EEs?

Answer 7

ERs yes because a university is private? another question said no because it’s in a trust so who knows
EE no because EE doesn’t have access to the funds

Question 8

can a SIMPLE allow loans?

Answer 8

Yes, if it is a SIMPLE 401k
NOT SIMPLE IRAs

Question 9

how to calculate what disability insurance will pay on a residual disability policy

Answer 9

(original salary - new reduced salary) x % covered

E.g., was $12K/mo, now $5K/mo and 60% policy will pay $4200 = $7K x 60%

Question 10

are loans available from an IRA?

Answer 10

no

Question 11

what action will the Board take if a CFP files bankrupty due to medical bills from car accident

Answer 11

nothing if proven that it wasn’t the result of inability to manage
I.e., no letter of admonishment, no revoke, no suspension, no disciplinary proceeding

Question 12

is an ER match in a SIMPLE limited to covered comp?

Answer 12

Yes for 401k
NO for IRA

Question 13

how is the exercise and sale of an ISO taxed if it doesn’t meet NUA holding period requirement?

Answer 13

• nothing at exercise
  at sale:
• ordinary income = exercise price - grant price
• STCG = sale price - exercise price
• ER gets deduction in same amont as ordinary income

Question 14

what is a prospectus used for?

Answer 14

to disclose expenses a client will incur

Question 15

are capital losses an above the line or below the line deduction?

Answer 15

Above the line

Question 16

how is ER match as

Question 17

monetary policy actions vs fiscal policy

Answer 17

monetary: buy government securities, decrease rate on excess reserves
fiscal: increase tax rate, decrease government spending

Question 18

how is 5-year property under MACRS depreciated?

Answer 18

The convention is double declining balance (DDB) half year first year and switch to straight line when straight line would be preferable to DDB.
- 1st Year is 100% / 5 × 2 = 40% × ½ = 20%
- 2nd Year is (100% - 20%) × 40% = 32%
- 3rd Year is (100% - 52%) × 40% = 19.2%
etc.

Question 19

what is the benefit of meeting the holding period requirement for NUA?

Answer 19

• the entire gain (sale price - grant price) is taxed as LTCG
  vs
• being taxed partially as ordinary income (exercise price - grant price) and capital gain (sale price - exercise price)

Question 20

is a written agreement required when engaging in financial advice without financial planning?

Answer 20

No
Only privacy policy must be in writing

Question 21

what does the disciplinary committee rely on to determine whether practice standards have been violated?

Answer 21

Code of Standards

Question 22

what is the max that can be contributed to a Coverdell ESA in a year?

Answer 22

$2K

Question 23

who is required to provide COBRA?

Answer 23

ER with 20+ EEs

Question 24

how much of a premium can be charged for COBRA?

Answer 24

2%

Question 25

how many unaccedited investors can contribute to a project through a private placement?

Answer 25

35

Question 26

which is allowed?
- A practitioner can properly recommend changing a goal that the practitioner and client have mutually defined.
- A recommendation can be inconsistent with a client’s personal and economic assumptions.

Answer 26

A practitioner can properly recommend changing a goal that the practitioner and client have mutually defined.

Question 27

who does a CFP have a duty to inform if they suspects illegal activity is occurring within their organization

Answer 27

• their supervisor
• Only have a duty to inform the appropriate regulatory authority if it’s being ignored by SUP