CPB CPB Tax Planning & Optimization 2

Question 1

What does QSBS stand for in the context of tax planning for high-net-worth clients?

Accepted Answer

Qualified Small Business Stock

Answer

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.

Question 2

Which IRS code section governs tax-deferred like-kind exchanges for real property?

Accepted Answer

Section 1031

Answer

Section 1031 allows investors to defer capital gains taxes by exchanging one investment property for another like-kind property, subject to strict timing rules.

Question 3

The generation-skipping transfer (GST) tax is primarily designed to prevent:

Accepted Answer

Bypassing estate taxes by passing wealth directly to grandchildren or later generations

Answer

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.

Question 4

A Grantor Retained Annuity Trust (GRAT) is primarily used to:

Accepted Answer

Transfer future asset appreciation out of an estate with minimal gift tax cost

Answer

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.

Question 5

In estate and gift tax planning, the 'unified credit' refers to:

Accepted Answer

A lifetime exemption amount that offsets both gift and estate taxes

Answer

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.

CPB - Certified Private Banker Practice Test

CPB - Certified Private Banker Practice Test

CPB CPB Tax Planning & Optimization 2