Practice Test Geeks(CEP) Certified Equity Professional Practice Test
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Tax Planning & Compliance Flashcards

7 cards from real CEP practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

Read the first 7 Tax Planning & Compliance flashcards as text

  1. RSUs are taxed as ordinary income at:

    Answer: Vesting date, based on FMV of shares delivered

    RSU income is recognized on the vesting/settlement date when shares are delivered, based on FMV at that time.

  2. An ESPP that qualifies under Section 423 must offer all full-time employees a purchase price that is no less than:

    Answer: 85% of FMV on the offering date or purchase date, whichever is lower

    Section 423 ESPPs may discount the purchase price to as low as 85% of the FMV on either the offering date or the purchase date, whichever produces the lower price.

  3. For a qualifying ESPP disposition, how is the discount portion (up to 15%) taxed?

    Answer: As ordinary income in the year of sale, capped at the actual gain

    In a qualifying disposition, the lesser of the actual gain or the purchase-date discount is treated as ordinary income; any remaining gain is long-term capital gain.

  4. A disqualifying ESPP disposition occurs when shares are sold:

    Answer: Before meeting the 2-year-from-offering and 1-year-from-purchase holding requirements

    A disqualifying disposition happens when shares are sold before holding them for 2 years from the offering date AND 1 year from the purchase date.

  5. Under Section 409A, a nonqualified deferred compensation plan that fails to comply may subject the employee to:

    Answer: Immediate income inclusion plus a 20% additional tax and interest

    Section 409A violations trigger immediate income inclusion of the deferred amount, plus a 20% additional tax and an interest penalty at the underpayment rate plus 1%.

  6. Which of the following equity awards is generally NOT subject to Section 409A if designed correctly?

    Answer: An NQSO granted at FMV with a standard 10-year term

    NQSOs granted at FMV (no discount) with no deferral feature are explicitly excluded from Section 409A under the stock rights exception.

  7. The Section 3121(v)(2) special timing rule for FICA taxes on nonqualified deferred compensation means FICA taxes are assessed:

    Answer: When the amount is no longer subject to a substantial risk of forfeiture (vesting)

    FICA taxes on NQDC become due when the compensation vests (is no longer subject to substantial risk of forfeiture), not when it is actually paid.