CTC Tax Planning & Advisory Strategies 2

Question 1

A married couple filing jointly has $400,000 in ordinary income. Which strategy would MOST directly reduce their exposure to the 3.8% Net Investment Income Tax (NIIT)?

Accepted Answer

Shift passive investment income into an active trade or business in which they materially participate

Answer

Income from a trade or business in which the taxpayer materially participates is excluded from NIIT, so converting passive income to active business income reduces the NIIT base.

Question 2

Under the 'bunching' strategy for itemized deductions, what is the primary tax benefit achieved?

Accepted Answer

Concentrating deductions into alternating years to exceed the standard deduction threshold in those years

Answer

Bunching concentrates deductible expenses (like charitable contributions) into one year so they exceed the standard deduction, then claiming the standard deduction in the off-year.

Question 3

A self-employed consultant earns $300,000 net profit. Which retirement plan allows the HIGHEST total annual contribution for 2024?

Accepted Answer

Solo 401(k) with employee and employer contributions

Answer

A Solo 401(k) allows both employee deferrals (up to $23,000 in 2024 plus catch-up) and employer profit-sharing contributions (up to 25% of compensation), potentially totaling more than a SEP-IRA alone.

Question 4

Which tax planning technique involves gifting appreciated stock to a donor-advised fund to receive an immediate charitable deduction while retaining advisory control over grant distributions?

Accepted Answer

Donor-advised fund (DAF) contribution

Answer

A DAF allows the donor to claim an immediate deduction for the full fair market value of contributed appreciated property while recommending grants to charities over time.

Question 5

For a business owner considering entity conversion from a C corporation to an S corporation, what is the MOST significant built-in gains tax concern?

Accepted Answer

Appreciated assets held at the time of conversion are subject to corporate-level tax if sold within the recognition period (generally 5 years)

Answer

The built-in gains (BIG) tax imposes a corporate-level tax on gains accrued before S election if those assets are sold within the 5-year recognition period.

(CTC) Chartered Tax Consultant Practice Test

(CTC) Chartered Tax Consultant Practice Test

CTC Tax Planning & Advisory Strategies 2