RFC Business Planning & Owner Strategies 3

Question 1

Which type of qualified retirement plan is generally most advantageous for an older business owner who wants to maximize tax-deductible contributions relative to younger employees?

Accepted Answer

Defined benefit pension plan

Answer

Defined benefit plans are actuarially determined, and because older participants have fewer years to accumulate benefits, required contributions for them are much higher, benefiting older business owners.

Question 2

For a self-employed individual, the effective maximum SEP-IRA contribution as a percentage of net self-employment earnings (after deducting half of self-employment tax) is approximately:

Accepted Answer

20%

Answer

Although the statutory rate is 25% of compensation, the self-referential nature of the calculation for sole proprietors reduces the effective rate to approximately 20% of net self-employment income.

Question 3

Under the Section 199A qualified business income (QBI) deduction, eligible pass-through business owners may deduct up to what percentage of their qualified business income?

Accepted Answer

20%

Answer

The Tax Cuts and Jobs Act created a 20% deduction on qualified business income for eligible owners of sole proprietorships, partnerships, S corporations, and trusts.

Question 4

The primary purpose of a Section 303 stock redemption is to:

Accepted Answer

Allow a corporation to redeem a deceased shareholder's stock to pay estate settlement costs without dividend treatment

Answer

Section 303 permits a closely held corporation to redeem stock from a decedent's estate at capital gains rates (often near zero due to stepped-up basis) to cover estate taxes and administration expenses.

Question 5

Under the Section 1202 exclusion, a non-corporate investor who sells qualified small business stock (QSBS) held for more than five years may exclude from federal income tax up to what percentage of the gain?

Accepted Answer

100%

Answer

For QSBS acquired after September 27, 2010, investors can exclude 100% of the gain from federal income tax if the stock is held more than five years.

(RFC) Registered Financial Consultant Practice Test

(RFC) Registered Financial Consultant Practice Test

RFC Business Planning & Owner Strategies 3