AAMS Tax Planning & Wealth Transfer Flashcards
6 cards from real AAMS practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 AAMS Tax Planning & Wealth Transfer flashcards as text
Which strategy allows a high-income earner who exceeds Roth IRA income limits to still fund a Roth IRA indirectly?
Answer: Backdoor Roth IRA
The backdoor Roth strategy involves making a non-deductible traditional IRA contribution and then converting it to a Roth, bypassing direct income limits.
The 'wash-sale rule' prevents an investor from claiming a tax loss if they purchase a substantially identical security within how many days before or after the sale?
Answer: 30 days
The wash-sale rule disallows a loss deduction if a substantially identical security is purchased within 30 days before or after the loss sale.
A charitable remainder trust (CRT) provides which primary benefit to the donor?
Answer: An income stream during life and a charitable deduction based on the present value of the remainder interest
A CRT provides the donor with an income stream and a partial charitable deduction equal to the present value of the amount eventually passing to charity.
529 college savings plan contributions grow tax-deferred, and withdrawals used for qualified education expenses are:
Answer: Tax-free at the federal level
Qualified withdrawals from 529 plans, including earnings, are entirely tax-free at the federal level when used for eligible education expenses.
Which transfer strategy allows parents to gift a lump sum to a 529 plan and treat it as if it were spread over five years for gift tax purposes?
Answer: Five-year gift tax averaging (superfunding)
Superfunding allows a one-time contribution of up to five times the annual exclusion to a 529 plan, treated as made ratably over five years to avoid gift tax.
The primary tax advantage of holding appreciated securities in a portfolio until death rather than selling them during life is:
Answer: Triggering the step-up in basis, eliminating capital gains tax on lifetime appreciation
Holding appreciated securities until death allows heirs to inherit them at a stepped-up basis, eliminating the capital gains tax on all appreciation that occurred during the decedent's lifetime.