WMS Tax Planning & Strategies

Question 1

What is the maximum federal long-term capital gains tax rate for high-income taxpayers under current U.S. tax law?

Accepted Answer

20%

Answer

10%

Answer

15%

Answer

25%

Question 2

A client exercises incentive stock options (ISOs) and holds the shares without selling them. Which tax planning consideration is most critical?

Accepted Answer

The spread may trigger the Alternative Minimum Tax (AMT) in the year of exercise

Answer

The spread is subject to ordinary income tax immediately upon exercise

Answer

ISOs are always entirely tax-free upon exercise regardless of circumstances

Answer

The gain is always treated as a short-term capital gain upon exercise

Question 3

Which strategy involves selling securities at a loss to offset capital gains while reinvesting in similar securities to maintain market exposure?

Accepted Answer

Tax-loss harvesting

Answer

Tax deferral

Answer

Asset location

Answer

Income shifting

Question 4

What is the annual gift tax exclusion amount per recipient for 2025?

Accepted Answer

$19,000

Answer

$15,000

Answer

$16,000

Answer

$17,000

Question 5

A client holds highly appreciated securities with a very low cost basis. Which strategy allows them to benefit a charity while avoiding capital gains tax?

Accepted Answer

Donate the appreciated securities directly to a qualified charity

Answer

Sell the securities first, then donate the cash proceeds to charity

Answer

Transfer the securities to a taxable account before donating

Answer

Convert the securities to bonds before making the charitable gift

Question 6

What is the 'step-up in basis' rule and how does it benefit heirs who inherit assets?

Accepted Answer

Inherited assets receive a new cost basis equal to the fair market value at the decedent's date of death

Answer

Heirs inherit assets at a higher purchase price administratively set by the estate

Answer

Heirs must pay capital gains tax on all appreciation before inheriting the assets

Answer

The original cost basis from when the decedent purchased the asset is carried over to heirs unchanged

Question 7

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

Accepted Answer

Interest income from most municipal bonds issued by state and local governments

Answer

Capital gains from selling municipal bonds at a profit

Answer

Revenue bonds only, not general obligation bonds

Answer

Private activity bonds only, regardless of the investor's AMT status