CFP Tax Planning & Compliance 4

Question 1

A robo-advisor platform performs tax-loss harvesting by selling a security at a loss and immediately buying a substantially identical ETF. The wash-sale rule under IRC Section 1091 disallows the loss if the replacement purchase occurs within:

Accepted Answer

30 calendar days before or after the sale

Answer

The wash-sale rule disallows a loss if a substantially identical security is purchased within 30 days before or after the sale that generated the loss.

Question 2

Under FBAR (FinCEN Form 114) rules, a US person must report foreign financial accounts if the aggregate value exceeded what threshold at any point during the calendar year?

Accepted Answer

$10,000

Answer

US persons must file an FBAR if the aggregate maximum value of all foreign financial accounts exceeded $10,000 at any time during the calendar year.

Question 3

A buy-now-pay-later (BNPL) fintech charges merchants an interchange-equivalent fee and consumers no stated interest. For tax purposes, implicit interest income embedded in merchant discount fees is generally recognized under:

Accepted Answer

Accrual accounting as the service is provided, with no imputed interest adjustment

Answer

Merchant discount fees are service income recognized as the BNPL service is provided; OID rules apply to debt instruments, not service fee arrangements.

Question 4

A US fintech company pays a software licensing fee to its Irish subsidiary. To avoid transfer pricing adjustments under IRC Section 482, the intercompany royalty rate must be set at:

Accepted Answer

An arm's-length price reflecting what unrelated parties would charge

Answer

Section 482 requires intercompany transactions to be priced at arm's length—what unrelated parties in similar circumstances would agree to.

Question 5

A fintech company issues convertible notes to investors. For tax purposes, a convertible note is generally characterized as:

Accepted Answer

Debt until converted, with interest expense deductible by the issuer

Answer

Convertible notes are treated as debt until conversion, allowing the issuer to deduct stated interest; the conversion itself is typically a non-taxable recapitalization.

(CFP) Certified Fintech Practitioner Practice Test

(CFP) Certified Fintech Practitioner Practice Test

CFP Tax Planning & Compliance 4