Tax Changes and Securities Licensing Exams

If you’re studying for a FINRA, NASAA or MSRB securities licensing exam such as the Series 6, Series 7, Series 65, Series 66, Series 50, Series 52, Series 79, Series 82 or Series 99, and you’re wondering how the sweeping tax overhaul might affect your exam and your studying, have no fear, the Solomon Exam Prep team is hard at work figuring out what the changes might mean for securities exam-takers. Continue reading

If you’re studying for a FINRA, NASAA or MSRB securities licensing exam such as the Series 6, Series 7, Series 65, Series 66, Series 50, Series 52, Series 79, Series 82 or Series 99, and you’re wondering how the sweeping tax overhaul might affect your exam and your studying, have no fear, the Solomon Exam Prep team is hard at work figuring out what the changes might mean for securities exam-takers. Regulators and exam committees have yet to weigh in, so what follows is just a first pass at the tax reform law that might be of particular interest to Solomon securities exam-takers:

Investment management fees

The new tax law eliminated a bunch of deductions that had been grouped together as “miscellaneous itemized deductions.” This includes deductions for unreimbursed employee expenses, union dues, legal expenses, and tax preparation, all of which are now gone. The biggest loss for investment advisers is that customers may no longer deduct their fees.

The loss of these deductions only applies to individuals. Businesses (including sole proprietorships) will still be able to deduct fees for investment advice. Individuals would have been less likely to use the deduction anyway, since the increase in the standard deduction makes itemizing less attractive.

The pass-through deduction

There is a new 20% deduction for people who get their income through a “pass-through entity” like a partnership, LLC, or S corporation. But not all pass-through income gets the deduction. This is one of the more complex provisions in the new law. A major limitation is that the deduction begins phasing out after $157,500 for certain “service trades or businesses,” defined as “any trade or business where the principal asset of such trade or business is the reputation or skill of 1 or more of its employees or owners.” Financial and brokerage services are specifically named as among the businesses in this category.

Benefits to REITs

REITs are pass-through entities, and income from REIT dividends gets the pass-through deduction, while avoiding the cap for income from service trades or businesses. The portion of a REIT’s dividends that comes from capital gains on the REIT’s property is specifically excluded from the new deduction. However, as a capital gain this portion is taxed at a lower rate to begin with.

REITs were also given the ability to opt out of a provision of the new law that could have hindered them. Most businesses must now accept a cap on the amount they can deduct for interest on their debt. A REIT can choose not to be subject to this limitation, if it also agrees to deduct depreciation on its real estate at a slower rate.

Advance refundings no longer tax-exempt

Under the new law, bonds issued for the purpose of “advance refunding” are never tax-exempt, not even for government bonds. Advance refunding is when the bond issuer wants to take advantage of lower interest rates by selling new bonds to pay off old bonds. If the old bonds are more than 90 days from maturity, this practice is considered advance refunding and the new bonds lose their tax-exempt status.

New income tax brackets for estates and trusts

The new law doubles the threshold before the estate tax kicks in, from $5.6 million to $11.2 million.

Estates and trusts also got lower tax rates and new tax brackets along with other types of taxpayers, as follows:

Old New
Income Rate
Up to $1,500 15%
$1,501 – $3,500 28%
$3,501 – $5,500 31%
$5,501 – $7,500 36%
$7,501 + 39.6%
Income Rate
Up to $2,550 10%
$2,551 – $9,150 24%
$9,151 – $12,500 35%
$12,501 + 37%

 

In addition, disability trusts still get the personal exemption that was eliminated for individuals.

Fewer taxpayers subject to alternative minimum tax

The alternative minimum tax (AMT) is designed to make sure wealthy taxpayers don’t reduce their taxes beyond a certain amount. Under the old law, individual taxpayers had to have an income of $54,300 for singles or $84,500 for married couples before they needed to worry about the AMT. Those amounts were raised to $70,300 for singles and $109,400 for married couples.

The AMT for corporations has been eliminated entirely.

Changes for special savings plans

The bill included several changes to IRAs, 401(k)s, and 529s. For example, converting a traditional IRA into a Roth IRA no longer comes with the option to change your mind and convert back within a limited period of time. People who lose or leave a job with an outstanding 401(k) loan now have longer to pay it back. 529 accounts can now be used for elementary and secondary school expenses, up to a limit of $10,000.

What didn’t make it into the final bill

The final version of the bill passed on December 20th. When you search for information about it, you should pay close attention to when that information was published or posted.

For example, at one point the bill included a proposed FIFO (first-in, first-out) rule, which said that when selling part of your stock in a company you have to sell the oldest shares first. Since the oldest shares have probably gained the most value, you would have owed more capital gains tax, at least in the short term.

However, the FIFO rule was dropped from the final version of the bill. You may have also read about a major reduction in the annual contribution limits for 401(k)s, or a proposal to remove the tax-exempt status of private activity bonds. Neither made it into the final bill.

This process is not over. Although the ink has dried on the legislation itself, the situation is still developing with regard to how the law will actually be applied in practice and how it will affect your licensing exam. Count on Solomon Exam Prep to be there with the most up-to-date information as it relates to FINRA, NASAA and MSRB securities licensing exams.

A Year in Review: MSRB Changes

Perhaps it’s the changing leaves or the nostalgic smell of pumpkin pie wafting through the office, but this fall has Solomon Exam Prep reflecting on the past year. Continue reading

Perhaps it’s the changing leaves or the nostalgic smell of pumpkin pie wafting through the office, but this fall has Solomon Exam Prep reflecting on the past year.

In particular, we’d like to look back on the MSRB’s launch of the Municipal Advisor Representative Qualification Exam—commonly known as the Series 50 exam. The MSRB officially launched this exam in 2016, but the exam wasn’t mandatory for municipal advisors until September 12, 2017.

The first exam of its kind and a huge success, the MSRB reports that more than 3,000 individuals passed the Series 50 exam before the September 12 deadline—and over 22% of those new municipal advisors used Solomon Exam Prep to study and pass their Series 50 exam.

The MSRB still has big plans coming down the line. The municipal securities regulator intends to launch the brand new Municipal Advisor Principal Exam (Series 54) in 2019.  And when it does, like with the Series 50, Solomon Exam Prep will be ready with another robust study program to help individuals pass this new municipal supervisory exam quickly and painlessly.

If you’d like a free consultation with Solomon about your firm’s licensing and registration program or you’d like to set one up, please call us at 503-601-0212 or email Jeremy@SolomonExamPrep.Com.

In the meantime, Solomon Exam Prep would like to extend a congratulations to the 3,000 and counting municipal advisors who passed the Series 50 this past year. Treat yourself to a slice of pumpkin pie.

September Study Question of the Month

Submit your answer to info@solomonexamprep.com to be entered to win a $10 Starbucks gift card. Continue reading

Congratulations to Elizabeth H., this month’s Study Question of the Month winner!

Submit your answer to info@solomonexamprep.com to be entered to win a $10 Starbucks gift card.

Question

Relevant to the Series 50 and Series 52.

 

 

 

 

 

A particular $5,000 bond matures in 5 years. What are the bond years on this single bond?

A. 5 bond years

B. 25 bond years

C. 25,000 bond years

D. 1,000 bond years

Answer: B.

When calculating bond years, the number of bonds is the number of $1,000 increments, even if the bonds are issued in a different denomination. Thus, this bond is considered to be 5 bonds (in $1,000 increments). Then multiply the number of bonds by the maturity of the bond (in years). 5 bonds x 5 years = 25 bond years.

The Clock Is Ticking: Series 50 Deadline is September 12, 2017

If you are a municipal advisor representative and have not yet passed the Series 50 exam, time is running out. As of this writing, you have 78 days until the September 12 deadline. After that, you will not be able to engage in municipal advisory activities until you have a Series 50 license. Continue reading

If you are a municipal advisor representative and have not yet passed the Series 50 exam, time is running out. As of this writing, you have 78 days until the September 12 deadline. After that, you will not be able to engage in municipal advisory activities until you have a Series 50 license.

municipal advisor is any firm that provides advice to, or on behalf of, municipal entities or an obligated person, and a municipal advisor representative is an individual who works on the municipal advisor’s behalf.

According to Lynette Kelly, executive director of the MSRB, in The Bond Buyer, “after September 12, any firm that doesn’t have an individual qualified [as a municipal advisor representative] cannot represent that they can engage in municipal advisory activities.” In other words, you can’t do the work without the license.

The MSRB released the 110-question permanent Series 50 exam September 12, 2016, allowing municipal advisor representatives a one-year grace period to pass the test and get a Series 50 license.

If you fail the Series 50 exam, you must wait 30 days before taking it again. If you fail three times in a row, you must wait 180 days before retaking it.

Need help? The Solomon Exam Prep pass rate for the Series 50 exam is 94.29%. Click here for more information, or give us a call at 503-601-0212 for more information!

Study Question of the Month – October 2016

This month’s study question from the Solomon Online Exam Simulator question database is now available! Continue reading

This month’s study question from the Solomon Online Exam Simulator question database is now available!

***Submit your answer to info@solomonexamprep.com to be entered to win a $10 Starbucks gift card.***

studyQuestion

Question (Relevant to the Series 6, Series 7Series 24Series 26Series 27, Series 51, Series 52, Series 53, and Series 82):

Which of the following claims would be covered by SIPC?

A. Claims of officers or partners of the failed firm

B. Claims involving nontransferable assets

C. Claims of subordinated lenders

D. Claims of persons who own more than 5% of the failed firm

Answer: B. SIPC only covers losses due to firm bankruptcy. It does not cover market losses. Nontransferable assets, such as proprietary funds and bonds in default, are covered as long as they are within the $500,000 limit for the account.

Additionally, the following claims are excluded from SIPC coverage:

  • Claims of officers or partners of the failed firm
  • Claims of persons who own more than 5% of the failed firm
  • Claims of subordinated lenders

Don’t Forget! Now You Can Register for the Series 50 Permanent Exam

As of September 12, 2016, the MSRB has opened the Series 50 permanent exam for municipal advisor firms to register their municipal advisor representatives. Continue reading

As of September 12, 2016, the MSRB has opened the Series 50 permanent exam for municipal advisor firms to register their municipal advisor representatives.

Here are a few things to remember:

series50cover_fmt

  • If you are required to take the Series 50 exam, you have a one-year grace period (ending September 12, 2017) during which you can engage in municipal advisory activities before you must pass the exam.
  • If you took the Series 50 pilot exam and did not pass, your first attempt at the Series 50 permanent exam is free.
  • The passing score for the Series 50 exam is 71%.
  • You have 180 minutes to complete the test.
  • The exam fee is $265.
  • If you used Solomon’s pilot exam study materials and did not pass, we will renew your materials at no charge. Just give us a call at 503-601-0212.

Visit http://apps.finra.org/testcenter/1/locations.aspx to find a testing location near you!

Announcing the Release of the Solomon Exam Prep Android Mobile App!

With the release of the Solomon Exam Prep app, you have full mobile access to your Solomon study materials with the click of a button. Continue reading

Do you need to take a securities licensing exam?

Do you wish you had more time to study?

With the release of the Solomon Exam Prep Android app, you have full mobile access to your Solomon study materials at the click of a button.

  • Easier and quicker—Just click the Solomon Exam Prep icon on your phone to be taken directly to your account.
  • Access all your materials—The app provides full site functionality and access to your study guide, exam simulator, audiobook, and video lecture.
  • No typing on tiny keyboards—Don’t worry about typing in a web address! Our app will take you right where you need to be.

Move into the future of mobile securities exam prep with the Solomon Exam Prep app!

To download the app, please visit: goo.gl/IkNceh

Solomon Exam Prep has helped thousands of financial professionals pass their FINRA, NASAA, and MSRB licensing exams, including the Series 6, Series 7, Series 24, Series 26, Series 27, Series 28, Series 50, Series 51, Series 52, Series 53, Series 62, Series 63, Series 65, Series 66, Series 79, Series 82, and the Series 99.

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