Financial Advisor Tax Planning Strategies for Financial Advisors

Question 1

Which of the following investment strategies reduces current taxable income by harvesting losses to offset capital gains?

Accepted Answer

Tax-loss harvesting

Answer

Momentum investing

Answer

Tax-gain harvesting

Answer

Dividend reinvestment

Question 2

Long-term capital gains on securities held more than one year are taxed at preferential rates of 0%, 15%, or 20% based on:

Accepted Answer

The investor's taxable income level

Answer

The type of security sold

Answer

How long the security was held beyond one year

Answer

Whether the gain was realized or unrealized

Question 3

The Net Investment Income Tax (NIIT) of 3.8% applies to individuals with net investment income whose modified adjusted gross income (MAGI) exceeds:

Accepted Answer

$200,000 single / $250,000 married filing jointly

Answer

$100,000 single / $150,000 married filing jointly

Answer

$125,000 single / $250,000 married filing jointly

Answer

$250,000 single / $500,000 married filing jointly

Question 4

Which type of municipal bond interest is generally exempt from federal income tax?

Accepted Answer

Both general obligation and revenue bonds

Answer

Revenue bonds only

Answer

General obligation bonds only

Answer

Municipal bonds issued in the taxpayer's home state only

Question 5

An investor sells highly appreciated stock to a charity rather than donating cash. The primary tax advantage is:

Accepted Answer

They avoid capital gains tax and can deduct the full fair market value

Answer

They receive a deduction equal to the original cost basis

Answer

They can deduct twice the stock's market value

Answer

They eliminate the need to report the transaction to the IRS

Question 6

What is the primary tax advantage of funding a Health Savings Account (HSA)?

Accepted Answer

Contributions are not subject to FICA taxes and grow tax-free for qualified medical expenses

Answer

Contributions are only tax-deductible at the state level

Answer

Withdrawals are tax-free for any purpose after age 65

Answer

There are no contribution limits