Basics Beginner: The Basics of Tax Planning

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When planning your investments, it is important to recognize that ______.

Acquiring assets that pay little in current income may make sense, tax-wise, but will never result in significant long-term gains

There are many sound assets that will increase your wealth over the long haul but which produce little or no current income

Most savvy investors focus on current income

There are many sound assets that will increase your wealth over the long haul but which produce little or no current income. Examples include raw land or good growth stocks.

A _______ is one kind of contribution that can help save you money on your taxes.

Flexible spending account

Tax-free account

Cafeteria plan

Flexible spending account. A flexible spending account is one kind of contribution you can make that can help save you money on your taxes.

The kiddie tax is a term that applies to what type of income?

Unearned income received by people under a certain age

Earned income received by people under a certain age

Any income received by people under a certain age

Unearned income received by people under a certain age. The kiddie tax applies to investment income and other types of unearned income.

Which of the following is a good tax-saving strategy?

Selling an asset as quickly as possible for maximum gain

Postponing the payment of operating expenses such as rent, so more deductions can be squeezed into the next tax year

Holding an asset for more than one year before selling it at a gain

Holding an asset for more than one year before selling it at a gain. This results in a lower long-term capital gain rate.

Tax-deductible education expenses include only amounts paid for tuition and fees at an accredited college or university.

True

False

False. Tuition at an accredited vocational school is also a qualified education expense.