Practice Quiz

Financial Planner

Category - Tax Planning

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In regards to tax planning, what is the financial planner’s goal?
  1. Maximize the client’s tax due
  2. Minimize the client’s tax due
  3. Maximize the client’s after-tax wealth
  4. Maximize the client’s income that can be hidden from the IRS
Explanation
Answer: C - You should never advise a client to “hide” income from the IRS; rather, the client should pay tax on all taxable income as required by law. When assisting a client with tax planning, a financial planner’s goal is to maximize after-tax wealth. This may mean that the client will pay more tax in order to create more wealth accumulation across his or her life.
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