RFC Tax Planning & Optimization 3

Question 1

A self-employed RFC client earns $200,000 net self-employment income. Which retirement plan allows the largest tax-deductible contribution in 2024?

Accepted Answer

Defined benefit pension plan

Answer

A defined benefit pension plan can allow contributions far exceeding 401(k) limits because the contribution is actuarially determined based on the desired retirement benefit, potentially reaching $265,000+ annually for older, high-earning self-employed individuals.

Question 2

What is the 'kiddie tax' and to whom does it apply?

Accepted Answer

Unearned income of children under age 19 (or 24 if full-time students) taxed at the parent's marginal rate above a threshold

Answer

The kiddie tax subjects unearned income (dividends, interest, capital gains) above the threshold to the parent's higher marginal rate, preventing income-shifting to children in lower brackets.

Question 3

Which of the following is NOT a strategy to reduce alternative minimum tax (AMT) exposure?

Accepted Answer

Accelerating income into the current year

Answer

Accelerating income into the current year increases taxable income and thus increases AMT exposure rather than reducing it; the other strategies all reduce AMT preference items or timing.

Question 4

A client has $30,000 in passive activity losses. Under which circumstance can they fully deduct these losses against ordinary income?

Accepted Answer

They qualify as a real estate professional with more than 750 hours of real estate activity

Answer

Real estate professionals who spend more than 750 hours per year and more than half their working time in real property trades can treat rental losses as non-passive, fully deductible against ordinary income.

Question 5

What tax treatment applies to qualified dividends received by a taxpayer in the 22% ordinary income tax bracket in 2024?

Accepted Answer

15% preferential rate

Answer

Qualified dividends are taxed at preferential capital gains rates; taxpayers in the 22% or 24% ordinary income brackets pay 15% on qualified dividends.

(RFC) Registered Financial Consultant Practice Test

(RFC) Registered Financial Consultant Practice Test

RFC Tax Planning & Optimization 3