CBS Tax Planning & Preparation 4

Question 1

A taxpayer in the 22% marginal bracket donates appreciated stock held over one year to a qualified charity. What is the primary tax advantage?

Accepted Answer

Deduction equals fair market value and no capital gains tax is owed on the appreciation

Answer

Donating long-term appreciated stock lets the taxpayer deduct the full fair market value while avoiding capital gains tax on the built-in appreciation.

Question 2

What is a Qualified Opportunity Zone (QOZ) investment and its primary tax benefit?

Accepted Answer

An investment that defers and potentially reduces capital gains taxes by reinvesting gains into designated distressed areas

Answer

QOZ investments allow taxpayers to defer capital gains by reinvesting into designated zones, with potential step-up in basis and exclusion of new gains after a 10-year hold.

Question 3

Which depreciation method allows a business to immediately expense up to the annual limit on qualifying assets in the year of purchase?

Accepted Answer

Section 179 expensing election

Answer

Section 179 allows businesses to immediately deduct the full cost of qualifying property in the year placed in service, up to the annual dollar limit.

Question 4

Under the passive activity loss (PAL) rules, when can a real estate professional fully deduct rental losses against ordinary income?

Accepted Answer

When they materially participate and spend more than 750 hours in real estate trades or businesses

Answer

A taxpayer qualifying as a real estate professional (750+ hours and more than half of working time in real property activities) can deduct rental losses against ordinary income.

Question 5

What is the primary tax advantage of a Health Savings Account (HSA) compared to a Flexible Spending Account (FSA)?

Accepted Answer

HSA funds roll over indefinitely and can be invested, offering a triple tax advantage

Answer

HSAs offer a triple tax advantage: contributions are pre-tax, growth is tax-free, and qualified withdrawals are tax-free, with no use-it-or-lose-it rule.

(CBS) Certified Budget Specialist Practice Test

(CBS) Certified Budget Specialist Practice Test

CBS Tax Planning & Preparation 4