Tax Planning & Optimization Flashcards
6 cards from real CFP practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 Tax Planning & Optimization flashcards as text
What is the federal estate tax exemption amount per individual in 2024?
Answer: $13.61 million
The federal estate tax exemption in 2024 is $13.61 million per individual, or $27.22 million for a married couple using portability.
A client earns a $50,000 bonus. Which tax planning strategy could help reduce the income tax impact of this lump-sum receipt?
Answer: Increasing charitable contributions, maximizing retirement plan contributions, and contributing to an HSA
Increasing deductible contributions (retirement plans, HSA, charitable gifts) in the year of a windfall can offset the additional taxable income and reduce the overall tax burden.
What is 'basis' in the context of capital gains taxation?
Answer: The original cost of an asset, adjusted for improvements, depreciation, and other factors
Tax basis is the original cost of an asset plus adjustments (e.g., capital improvements or depreciation), used to calculate the gain or loss upon sale.
Under the step-up in basis rule at death, how is the inherited asset's basis determined for the heir?
Answer: The fair market value of the asset on the date of the decedent's death
Inherited assets receive a stepped-up basis equal to the asset's fair market value on the date of the decedent's death, eliminating capital gains accrued during the decedent's lifetime.
What is a Qualified Longevity Annuity Contract (QLAC) and how does it affect RMDs?
Answer: A deferred income annuity purchased inside a retirement account that reduces RMDs by excluding the QLAC value from the RMD calculation
A QLAC allows up to $200,000 of IRA funds to be moved into a deferred income annuity, removing that amount from the RMD calculation until the annuity's income start date (max age 85).
Which of the following correctly describes the tax treatment of municipal bond interest at the federal level?
Answer: Exempt from federal income tax, but may be subject to state income tax depending on the issuing state
Interest income from municipal bonds is generally exempt from federal income tax, though it may be subject to state taxes if issued by a state other than the investor's home state.