AIP AIP Tax Planning & Estate Strategies

Question 1

Which type of account allows US investors to make after-tax contributions and enjoy tax-free qualified withdrawals in retirement?

Accepted Answer

Roth IRA

Answer

Traditional IRA

Answer

SEP-IRA

Answer

403(b) plan

Question 2

The federal estate tax exemption allows estates below a certain threshold to pass assets to heirs:

Accepted Answer

Free from federal estate tax

Answer

Subject to a flat 15% capital gains rate

Answer

Only after a mandatory five-year holding period

Answer

Through a court-supervised probate process exclusively

Question 3

Tax-loss harvesting involves:

Accepted Answer

Selling losing investments to offset realized capital gains and reduce tax liability

Answer

Deferring all realized gains to the next tax year

Answer

Investing exclusively in tax-exempt municipal bonds

Answer

Converting traditional retirement accounts to Roth accounts

Question 4

A charitable remainder trust (CRT) provides which primary benefit to the donor?

Accepted Answer

An income stream during the donor's lifetime plus a charitable deduction at trust creation

Answer

Complete elimination of all estate and income taxes

Answer

Immediate lump-sum payment equal to the donated asset's fair market value

Answer

Protection of assets from all creditors indefinitely

Question 5

Which of the following correctly describes the 'step-up in basis' rule?

Accepted Answer

Inherited assets receive a new cost basis equal to fair market value at the date of the decedent's death

Answer

Assets held over 10 years automatically receive a higher cost basis

Answer

The IRS increases cost basis annually by the inflation rate

Answer

Step-up in basis applies only to assets held in retirement accounts

Question 6

For high-income investors, investing in municipal bonds is attractive primarily because:

Accepted Answer

Interest income from most municipal bonds is exempt from federal income tax

Answer

Municipal bonds offer higher yields than equivalent corporate bonds

Answer

Municipal bonds are guaranteed by the US federal government

Answer

Municipal bonds are not subject to market price fluctuations