Tax Consulting Tax Management 2

Question 1

A client owns a sole proprietorship and wants to reduce self-employment tax exposure. Which strategy is most commonly recommended?

Accepted Answer

Electing S corporation status and paying a reasonable salary

Answer

Filing as a C corporation only

Answer

Deferring all income indefinitely

Answer

Claiming the standard deduction twice

Question 2

What is the primary purpose of tax planning as distinct from tax compliance?

Accepted Answer

To proactively arrange affairs to minimize future tax liability

Answer

To file returns by the deadline

Answer

To respond to IRS audit notices

Answer

To calculate prior-year refunds

Question 3

Which account allows tax-free growth and tax-free qualified withdrawals in retirement?

Accepted Answer

Roth IRA

Answer

Traditional 401(k)

Answer

Taxable brokerage account

Answer

Health Savings Account used for non-medical costs

Question 4

A taxpayer wants to offset capital gains. What technique involves selling losing investments to reduce taxable gains?

Accepted Answer

Tax-loss harvesting

Answer

Income averaging

Answer

Like-kind exchange

Answer

Depreciation recapture

Question 5

Under the wash-sale rule, a loss is disallowed if a substantially identical security is repurchased within how many days?

Accepted Answer

30 days before or after the sale

Answer

7 days after the sale only

Answer

90 days before the sale

Answer

1 year after the sale

Question 6

Which entity type generally provides pass-through taxation while limiting personal liability?

Accepted Answer

Limited liability company (LLC)

Answer

C corporation

Answer

General partnership

Answer

Sole proprietorship

Question 7

A high-income client wants to reduce taxable income through charitable giving while retaining an income stream. Which vehicle fits best?

Accepted Answer

Charitable remainder trust

Answer

Direct cash donation

Answer

Donor-advised fund with no payout

Answer

Private foundation distribution to self