CPB Tax Planning & Optimization Flashcards
6 cards from real CPB practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 CPB Tax Planning & Optimization flashcards as text
What does QSBS stand for in the context of tax planning for high-net-worth clients?
Answer: Qualified Small Business Stock
Qualified Small Business Stock (QSBS) under IRC Section 1202 can allow eligible investors to exclude up to 100% of capital gains from qualifying stock sales.
Which IRS code section governs tax-deferred like-kind exchanges for real property?
Answer: Section 1031
Section 1031 allows investors to defer capital gains taxes by exchanging one investment property for another like-kind property, subject to strict timing rules.
The generation-skipping transfer (GST) tax is primarily designed to prevent:
Answer: Bypassing estate taxes by passing wealth directly to grandchildren or later generations
The GST tax imposes an additional layer of tax when assets skip a generation, preventing families from avoiding estate taxes at the children's level.
A Grantor Retained Annuity Trust (GRAT) is primarily used to:
Answer: Transfer future asset appreciation out of an estate with minimal gift tax cost
A GRAT is structured so the grantor receives an annuity stream and any appreciation above the IRS hurdle rate passes to heirs free of gift tax.
In estate and gift tax planning, the 'unified credit' refers to:
Answer: A lifetime exemption amount that offsets both gift and estate taxes
The unified credit provides a lifetime exemption (currently over $13 million per individual) that can be applied against taxable gifts during life and the estate at death.
Which strategy allows high-income earners who exceed the Roth IRA income limits to still fund a Roth IRA?
Answer: Backdoor Roth conversion
The backdoor Roth strategy involves making a non-deductible Traditional IRA contribution and then converting it to a Roth IRA, bypassing income limits.