CPWA Final Exam – Questions With Complete Answers What are Values (ILOE) Right Ans - Integrity, Loyalty, Objectivity, Ethical Conduct Code of responsiblity Right Ans - Client confidentiality, Consistent with legal and regulatory requirements and firm polices.Respond to PRB Right Ans - Appeal and Conviciton, Suspension 60 and 60
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Best age to learn fin literacy Right Ans - 7/8- 13/14 Confirmation Bias Right Ans - You overvalue info that confirms what you beleive and dont listen to info that contradicts their beliefs. This can leave you in the dark on info.Affinity Bias Right Ans - Investors dont make wise choices always because they pick a certain product or service that they think aligns with their values.So people buy things that dont make business sense.Mental accounting Right Ans - You put money in buckets. This can lead to investors not optimizing portfolios. This is tied with house money as your money grows you take on more risk.Immigrants to wealth Right Ans - 1st gen clients of wealth. Can display resistence, receptiveness, or hesitancy but not apathy. They do care. 80% of wealthy americans fall into this camp.Natives to the Land of Wealth Right Ans - Grew up with money. 90% change FAs within 2-3 tears of wealth transfer.SEC Family Office Rule Right Ans - Excluded from Advisor Act Regulation.As long as you only give advice to family office clients and do not hold yourslef out to the public as an FA.Marginal Tax rate vs Effective Tax Rate Right Ans - Marginal Rate is what the next dollar is taxed at. You use this when deciding when to do a new project. Effective Rate is the average rate your taxed at. 1 / 3
Proper use of marks Right Ans - CPWA wwith the R with the circle or its Certifed Private Wealth Advisor with the R and circle.SFO, MFO, VFO Right Ans - SFO family office works just for one private family. They handle everything. Normally only makes sense if you have at least 100M. MFO is similar but for multiple families, they could be connected but it is not a requiremnt. VFO. Outsource it to a MS or GS IRD Right Ans - Income that the decedent was entitled to but not included in his taxable estate in the year of the death. Examples are comp for service rendered, dividends declared but not paid. You do not get an step up in basis for IRD. You are taxed how the decedent would be taxed. Ord Income or Cap gains. You get an income tax deduction if the estate tax was already paid.Wash Sale Right Ans - If a taxpayer sells a stock or security 30 days before or after the 61 day period the taxpayer acquires or tries to acquire stock. The disallowed loss is added back to cost basis. So no loss but your basis is higher STCG and LTCG Cals Right Ans - Net all ST cap gains and losses first/ Then net at LT Cap gains and losses. Then offset them. You can net all ST capital gain and losses 3k capital losses can offset ordinary income. The rest carries forward ISO Right Ans - Must exercise two years after grant and sell 1 year after Exercise to get LTCG. Spread between FMV and exercise price are AMT prefrence items.NSOs Right Ans - Not taxed at time at grant. You are taxed as ordinary income when you exercise. If you sell after a year its a LTCG.Assets attractive to Creditors Right Ans - Joint titling, Vacation Homes, Second Homes, Some Non qual accounts are at risk and IRAs over 1.5M.Fraudulent conveyance could mess you up also.Enity types for protection Right Ans - Spendthrift, LLC, LPs.Charging Order Right Ans - How creditors reach an enitiy. In most states you need a burden of proof to piece the corp vail. Fraud and Gross neglience is 2 / 3
how you can piece the vail. Negligence is the failure to uphold a standard of care that is expressed in law or a statue.338 election Right Ans - Is when you buy stock for legal reasons and assets for tax reasons. This is huge because the buyer gets a set up in Basis. Buyer and selelr must agree on this. Only Corps can do this.Investment Interest. Right Ans - interest paid to borrow money to make investments is deducitble but limited ot amount of Net Investment Income.Which equals investment income minus expenses. Investment interest that is not deductible can be carried forward.Passive Activites Right Ans - Losses from passive activates are deductible to the extent there is passive income. If passive incoem exceeds passive losses, are the losses are deductible.AMT-ISO Impact Right Ans - The holder of an ISO realizes a gain or loss for AMT equal to the difference of the FMV and the exercise price When is gift complete Right Ans - Irrevocable gifts where the donor relinquieshes his or her power to revoke durning life of when the donor dies.Tax brackets Right Ans - Ordinary Income 10-37
LTCG 0-20
AMT 26 and 28 Collectibles and small business stock 28% Installment Tax sale Right Ans - Its always 90% for current year. If income is under 150k you pay 100% over 150K 110% Convertible Arbitrage Right Ans - Strategy that aims to capitalize on mispricing between convertible bonds and its udnerlying stock.Asset location Right Ans - Really think about UBTI. Dont want UBTI in Retirement accounts or corp accounts Relative Wealth Measure Right Ans - Higher the better, zero indicates little tax impact. Works in all kind of markets. RWM usually negative but can be
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