CTA Tax Planning and Strategy 2

Question 1

Which retirement plan allows the highest annual contribution limit for self-employed individuals in 2024?

Accepted Answer

Solo 401(k)

Answer

A Solo 401(k) allows self-employed individuals to make both employee deferrals ($23,000 in 2024) and employer contributions, for a combined limit of up to $69,000.

Question 2

What is the purpose of a like-kind exchange under IRC Section 1031?

Accepted Answer

To defer capital gains recognition when exchanging business or investment real property

Answer

A Section 1031 like-kind exchange allows taxpayers to defer capital gains taxes by reinvesting proceeds from the sale of real property into similar real property.

Question 3

Which strategy allows high-income taxpayers to contribute to a Roth IRA indirectly by first contributing to a non-deductible traditional IRA?

Accepted Answer

Backdoor Roth IRA

Answer

The backdoor Roth IRA strategy involves making a non-deductible traditional IRA contribution and then immediately converting it to a Roth IRA.

Question 4

Qualified Opportunity Zone (QOZ) investments offer which tax benefit?

Accepted Answer

Deferral and potential reduction of capital gains taxes, plus exclusion of gains from QOZ investment appreciation

Answer

QOZ investments allow deferral of existing capital gains, a step-up in basis for long-held investments, and exclusion of gains on QOZ fund appreciation held over 10 years.

Question 5

Which of the following is a valid strategy to avoid the 10% early withdrawal penalty from a retirement account?

Accepted Answer

Taking substantially equal periodic payments (SEPP) under Rule 72(t)

Answer

Rule 72(t) allows penalty-free distributions from IRAs if payments are taken as substantially equal periodic payments based on life expectancy.

CTA - Certified Tax Advisor Practice Test

CTA - Certified Tax Advisor Practice Test

CTA Tax Planning and Strategy 2