Tax Strategies Flashcards

Which retirement plan type typically allows the largest annual deductible contributions for an older, high-income business owner?

Answer: Defined benefit (cash balance) plan

Defined benefit plans fund toward a target benefit, so contributions for older owners can far exceed defined contribution limits.

Under Section 121, married taxpayers filing jointly may exclude up to how much gain on the sale of a principal residence they owned and used for 2 of the last 5 years?

Answer: $500,000

The Section 121 exclusion is $250,000 for single filers and $500,000 for qualifying married joint filers.

To qualify as a real estate professional, a taxpayer must perform more than half of personal services in real property trades and at least how many hours annually?

Answer: 750 hours

Real estate professional status requires over 750 hours and more than half of personal service time in real property businesses.

The so-called short-term rental strategy can allow rental losses to offset W-2 income when the average guest stay is how long and the owner materially participates?

Answer: 7 days or less

If the average stay is 7 days or less, the activity is not a 'rental activity' under passive rules, so material participation makes losses nonpassive.

What is the key tax benefit of structuring a property sale as an installment sale under Section 453?

Answer: Gain is recognized proportionally as payments are received

Installment sale treatment spreads gain recognition over the years payments are collected, though recapture is recognized upfront.

Under SECURE 2.0, unused 529 plan funds may be rolled into the beneficiary's Roth IRA up to what lifetime maximum?

Answer: $35,000

SECURE 2.0 allows up to $35,000 lifetime in 529-to-Roth rollovers, subject to annual limits and a 15-year account rule.

To defer a capital gain through a Qualified Opportunity Fund, the taxpayer generally must reinvest the gain within how many days of the sale?

Answer: 180 days

Eligible gains must generally be invested in a QOF within 180 days of the realization event.