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

The maximum federal long-term capital gains tax rate is 20% for taxpayers in the highest income bracket, separate from the additional 3.8% NIIT surtax that may also apply.

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 bargain element (spread) on ISO exercise is an AMT preference item and can trigger AMT liability even though no regular income tax is owed at the time of 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-loss harvesting involves selling securities at a loss to offset capital gains and reinvesting in similar (but not substantially identical) securities to maintain portfolio exposure while capturing the tax benefit.

Question 4

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

Accepted Answer

$19,000

Answer

The annual gift tax exclusion for 2025 is $19,000 per recipient, allowing donors to give this amount to any number of individuals without reducing their lifetime exemption.

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

Donating appreciated securities directly to a qualified charity allows the donor to deduct the fair market value while avoiding capital gains tax on the built-in gain entirely.

(WMS) Wealth Management Specialist Certification Practice Test

(WMS) Wealth Management Specialist Certification Practice Test

WMS Tax Planning & Strategies