Financial Advisor Tax Planning Strategies for Financial Advisors 2

Question 1

Which estate planning strategy allows a donor to gift assets while retaining an income stream, with the remainder passing to charity?

Accepted Answer

Charitable Remainder Trust (CRT)

Answer

A Charitable Remainder Trust provides the donor with income for life or a term of years, with the remaining assets passing to a charity, generating a partial charitable deduction.

Question 2

For 2024, what is the annual federal gift tax exclusion per recipient?

Accepted Answer

$18,000

Answer

For 2024, the annual gift tax exclusion is $18,000 per recipient, allowing donors to give up to this amount to any number of individuals without using lifetime exemption.

Question 3

The step-up in basis at death means that inherited assets receive a new cost basis equal to:

Accepted Answer

The fair market value at the date of the decedent's death

Answer

Under IRC Section 1014, inherited assets receive a stepped-up cost basis equal to their fair market value on the date of the owner's death, potentially eliminating capital gains tax on lifetime appreciation.

Question 4

Qualified Opportunity Zone (QOZ) investments allow investors to:

Accepted Answer

Defer and potentially reduce capital gains taxes by investing in designated economically distressed areas

Answer

Qualified Opportunity Zone investments allow investors to defer capital gains by investing within 180 days, with potential gain reduction and tax-free appreciation if held for 10+ years.

Question 5

Which of the following is a tax-efficient strategy for a high-income client with a large traditional IRA who wants to reduce future RMDs?

Accepted Answer

Converting portions of the traditional IRA to a Roth IRA in low-income years

Answer

Converting traditional IRA assets to a Roth IRA reduces future RMDs because Roth IRAs have no RMD requirements, and conversions in lower-income years minimize the tax cost.

Financial Advisor Practice Test

Financial Advisor Practice Test

Financial Advisor Tax Planning Strategies for Financial Advisors 2