{"id":33464,"date":"2023-11-08T17:04:30","date_gmt":"2023-11-08T17:04:30","guid":{"rendered":"https:\/\/analystprep.com\/study-notes\/?p=33464"},"modified":"2024-03-24T04:10:25","modified_gmt":"2024-03-24T04:10:25","slug":"tax-considerations-and-private-client-investments","status":"publish","type":"post","link":"https:\/\/analystprep.com\/study-notes\/cfa-level-iii\/tax-considerations-and-private-client-investments\/","title":{"rendered":"Tax considerations and private client investments"},"content":{"rendered":"<p><iframe loading=\"lazy\" src=\"\/\/www.youtube.com\/embed\/SXVPg1u4fuc\" width=\"611\" height=\"343\" allowfullscreen=\"allowfullscreen\"><\/iframe><\/p>\n<h2>Common Tax Categories<\/h2>\n<ul>\n<li><strong>Taxes on income:<\/strong> These include taxes on salaries, interest, dividends, capital gains, and rental income. <\/li>\n<li><strong>Wealth-based taxes:<\/strong> These include taxes on the holding of certain types of property and taxes on the transfer of wealth. <\/li>\n<li><strong>Taxes on consumption\/spending:<\/strong> Sales taxes, and value-added taxes.<\/li>\n<\/ul>\n<h2>Basic Tax Strategies<\/h2>\n<p>Taxes are normally reflected in a private client&apos;s financial plan and asset allocation decisions. While an in-depth discussion of tax strategies is beyond the scope of this reading, the following considerations are common to many clients: <\/p>\n<ul>\n<li><strong>Tax avoidance:<\/strong> Tax avoidance is a common goal of individuals. Tax avoidance differs from illegal tax evasion. Depending on the country, investors may be allowed to contribute a restricted amount to certain accounts that are tax-free and can be withdrawn tax-free. Another example of tax avoidance involves various wealth transfer techniques, like annual gift allowances.<\/li>\n<li><strong>Tax reduction:<\/strong> Private wealth managers typically try to reduce the tax burden on their clients. For example, a wealth manager may recommend tax-exempt bonds that can produce a higher after-tax return than taxable bonds. Or a wealth manager may recommend limiting investment in asset classes with less favorable tax characteristics while increasing exposure to more tax-efficient asset classes. <\/li>\n<li><strong>Tax deferral:<\/strong> When certain taxes are deferred and recognized at a later date, clients can reap the benefits of compounding portfolio returns that aren&apos;t diminished by periodic tax payments. Some investors in a progressive tax system may also seek to defer taxes because they believe future tax rates may be lower. This could include delaying the sale of positions with capital gains, yet to be realized.<\/li>\n<\/ul>\n<blockquote>\n<h2>Question<\/h2>\n<p>Gifting funds to a minor is <em>best<\/em> described as an example of tax:<\/p>\n<ol type=\"A\">\n<li>Deferral.<\/li>\n<li>Reduction.<\/li>\n<li>Avoidance.<\/li>\n<\/ol>\n<p><strong>Solution<\/strong><\/p>\n<p><strong>The correct answer is C.<\/strong><\/p>\n<p>Many countries permit annual allowances of gifts to be made, tax-free. In the US, this has recently been up to $15,000 annually. In making the gift, the taxable estate of the gift giver is reduced, thereby <em>avoiding<\/em> future wealth transfer taxes (provided the lifetime exclusion is not met).<\/p>\n<p><strong>A is incorrect.<\/strong> Answer choice A is not strong enough, as it means only delaying a tax, but still paying it in the future.<\/p>\n<p><strong>B is incorrect.<\/strong> Answer choice B is also not strong enough, in the sense that taxes are not being reduced here but avoided altogether.<\/p>\n<\/blockquote>\n<p>Reading 7: Overview of Private Wealth Management<\/p>\n<p>Los 7 (c) Identify tax considerations affecting a private client&apos;s investments<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Common Tax Categories Taxes on income: These include taxes on salaries, interest, dividends, capital gains, and rental income. Wealth-based taxes: These include taxes on the holding of certain types of property and taxes on the transfer of wealth. Taxes on&#8230;<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[571],"tags":[],"class_list":["post-33464","post","type-post","status-publish","format-standard","hentry","category-cfa-level-iii","blog-post","no-post-thumbnail","animate"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.4 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Tax considerations and private client investments - CFA, FRM, and Actuarial Exams Study Notes<\/title>\n<meta name=\"description\" content=\"Understand the common tax categories and basic tax strategies in private wealth management, including tax avoidance, reduction, and deferral.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/analystprep.com\/study-notes\/cfa-level-iii\/tax-considerations-and-private-client-investments\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Tax considerations and private client investments - CFA, FRM, and Actuarial Exams Study Notes\" \/>\n<meta property=\"og:description\" content=\"Understand the common tax categories and basic tax strategies in private wealth management, including tax avoidance, reduction, and deferral.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/analystprep.com\/study-notes\/cfa-level-iii\/tax-considerations-and-private-client-investments\/\" \/>\n<meta property=\"og:site_name\" content=\"CFA, FRM, and Actuarial Exams Study Notes\" \/>\n<meta property=\"article:published_time\" content=\"2023-11-08T17:04:30+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2024-03-24T04:10:25+00:00\" \/>\n<meta name=\"author\" content=\"Nicolas Joyce\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Nicolas Joyce\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"2 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\\\/\\\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\\\/\\\/analystprep.com\\\/study-notes\\\/cfa-level-iii\\\/tax-considerations-and-private-client-investments\\\/#article\",\"isPartOf\":{\"@id\":\"https:\\\/\\\/analystprep.com\\\/study-notes\\\/cfa-level-iii\\\/tax-considerations-and-private-client-investments\\\/\"},\"author\":{\"name\":\"Nicolas Joyce\",\"@id\":\"https:\\\/\\\/analystprep.com\\\/study-notes\\\/#\\\/schema\\\/person\\\/393e8b0a7757cde1d197fb0c060af25f\"},\"headline\":\"Tax considerations and private client investments\",\"datePublished\":\"2023-11-08T17:04:30+00:00\",\"dateModified\":\"2024-03-24T04:10:25+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\\\/\\\/analystprep.com\\\/study-notes\\\/cfa-level-iii\\\/tax-considerations-and-private-client-investments\\\/\"},\"wordCount\":411,\"articleSection\":[\"Level III of the CFA\u00ae Program\"],\"inLanguage\":\"en-US\"},{\"@type\":\"WebPage\",\"@id\":\"https:\\\/\\\/analystprep.com\\\/study-notes\\\/cfa-level-iii\\\/tax-considerations-and-private-client-investments\\\/\",\"url\":\"https:\\\/\\\/analystprep.com\\\/study-notes\\\/cfa-level-iii\\\/tax-considerations-and-private-client-investments\\\/\",\"name\":\"Tax considerations and private client investments - CFA, FRM, and Actuarial Exams Study Notes\",\"isPartOf\":{\"@id\":\"https:\\\/\\\/analystprep.com\\\/study-notes\\\/#website\"},\"datePublished\":\"2023-11-08T17:04:30+00:00\",\"dateModified\":\"2024-03-24T04:10:25+00:00\",\"author\":{\"@id\":\"https:\\\/\\\/analystprep.com\\\/study-notes\\\/#\\\/schema\\\/person\\\/393e8b0a7757cde1d197fb0c060af25f\"},\"description\":\"Understand the common tax categories and basic tax strategies in private wealth management, including tax avoidance, reduction, and deferral.\",\"breadcrumb\":{\"@id\":\"https:\\\/\\\/analystprep.com\\\/study-notes\\\/cfa-level-iii\\\/tax-considerations-and-private-client-investments\\\/#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\\\/\\\/analystprep.com\\\/study-notes\\\/cfa-level-iii\\\/tax-considerations-and-private-client-investments\\\/\"]}]},{\"@type\":\"BreadcrumbList\",\"@id\":\"https:\\\/\\\/analystprep.com\\\/study-notes\\\/cfa-level-iii\\\/tax-considerations-and-private-client-investments\\\/#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"Home\",\"item\":\"https:\\\/\\\/analystprep.com\\\/study-notes\\\/\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"Tax considerations and private client investments\"}]},{\"@type\":\"WebSite\",\"@id\":\"https:\\\/\\\/analystprep.com\\\/study-notes\\\/#website\",\"url\":\"https:\\\/\\\/analystprep.com\\\/study-notes\\\/\",\"name\":\"CFA, FRM, and Actuarial Exams Study Notes\",\"description\":\"Question Bank and Study Notes for the CFA, FRM, and Actuarial exams\",\"potentialAction\":[{\"@type\":\"SearchAction\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\\\/\\\/analystprep.com\\\/study-notes\\\/?s={search_term_string}\"},\"query-input\":{\"@type\":\"PropertyValueSpecification\",\"valueRequired\":true,\"valueName\":\"search_term_string\"}}],\"inLanguage\":\"en-US\"},{\"@type\":\"Person\",\"@id\":\"https:\\\/\\\/analystprep.com\\\/study-notes\\\/#\\\/schema\\\/person\\\/393e8b0a7757cde1d197fb0c060af25f\",\"name\":\"Nicolas Joyce\",\"image\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\\\/\\\/secure.gravatar.com\\\/avatar\\\/684508c19e959bb01da12a9dc741428f559e4e5df43fc41ed68efa7f2d3b2b9d?s=96&d=mm&r=g\",\"url\":\"https:\\\/\\\/secure.gravatar.com\\\/avatar\\\/684508c19e959bb01da12a9dc741428f559e4e5df43fc41ed68efa7f2d3b2b9d?s=96&d=mm&r=g\",\"contentUrl\":\"https:\\\/\\\/secure.gravatar.com\\\/avatar\\\/684508c19e959bb01da12a9dc741428f559e4e5df43fc41ed68efa7f2d3b2b9d?s=96&d=mm&r=g\",\"caption\":\"Nicolas Joyce\"},\"url\":\"https:\\\/\\\/analystprep.com\\\/study-notes\\\/author\\\/kajal\\\/\"}]}<\/script>\n<meta property=\"og:video\" content=\"https:\/\/www.youtube.com\/embed\/SXVPg1u4fuc\" \/>\n<meta property=\"og:video:type\" content=\"text\/html\" \/>\n<meta property=\"og:video:duration\" content=\"3218\" \/>\n<meta property=\"og:video:width\" content=\"480\" \/>\n<meta property=\"og:video:height\" content=\"270\" \/>\n<meta property=\"ya:ovs:adult\" content=\"false\" \/>\n<meta property=\"ya:ovs:upload_date\" content=\"2023-11-08T17:04:30+00:00\" \/>\n<meta property=\"ya:ovs:allow_embed\" content=\"true\" \/>\n<!-- \/ Yoast SEO plugin. -->","yoast_head_json":{"title":"Tax considerations and private client investments - CFA, FRM, and Actuarial Exams Study Notes","description":"Understand the common tax categories and basic tax strategies in private wealth management, including tax avoidance, reduction, and deferral.","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/analystprep.com\/study-notes\/cfa-level-iii\/tax-considerations-and-private-client-investments\/","og_locale":"en_US","og_type":"article","og_title":"Tax considerations and private client investments - CFA, FRM, and Actuarial Exams Study Notes","og_description":"Understand the common tax categories and basic tax strategies in private wealth management, including tax avoidance, reduction, and deferral.","og_url":"https:\/\/analystprep.com\/study-notes\/cfa-level-iii\/tax-considerations-and-private-client-investments\/","og_site_name":"CFA, FRM, and Actuarial Exams Study Notes","article_published_time":"2023-11-08T17:04:30+00:00","article_modified_time":"2024-03-24T04:10:25+00:00","author":"Nicolas Joyce","twitter_card":"summary_large_image","twitter_misc":{"Written by":"Nicolas Joyce","Est. reading time":"2 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"Article","@id":"https:\/\/analystprep.com\/study-notes\/cfa-level-iii\/tax-considerations-and-private-client-investments\/#article","isPartOf":{"@id":"https:\/\/analystprep.com\/study-notes\/cfa-level-iii\/tax-considerations-and-private-client-investments\/"},"author":{"name":"Nicolas Joyce","@id":"https:\/\/analystprep.com\/study-notes\/#\/schema\/person\/393e8b0a7757cde1d197fb0c060af25f"},"headline":"Tax considerations and private client investments","datePublished":"2023-11-08T17:04:30+00:00","dateModified":"2024-03-24T04:10:25+00:00","mainEntityOfPage":{"@id":"https:\/\/analystprep.com\/study-notes\/cfa-level-iii\/tax-considerations-and-private-client-investments\/"},"wordCount":411,"articleSection":["Level III of the CFA\u00ae Program"],"inLanguage":"en-US"},{"@type":"WebPage","@id":"https:\/\/analystprep.com\/study-notes\/cfa-level-iii\/tax-considerations-and-private-client-investments\/","url":"https:\/\/analystprep.com\/study-notes\/cfa-level-iii\/tax-considerations-and-private-client-investments\/","name":"Tax considerations and private client investments - CFA, FRM, and Actuarial Exams Study Notes","isPartOf":{"@id":"https:\/\/analystprep.com\/study-notes\/#website"},"datePublished":"2023-11-08T17:04:30+00:00","dateModified":"2024-03-24T04:10:25+00:00","author":{"@id":"https:\/\/analystprep.com\/study-notes\/#\/schema\/person\/393e8b0a7757cde1d197fb0c060af25f"},"description":"Understand the common tax categories and basic tax strategies in private wealth management, including tax avoidance, reduction, and deferral.","breadcrumb":{"@id":"https:\/\/analystprep.com\/study-notes\/cfa-level-iii\/tax-considerations-and-private-client-investments\/#breadcrumb"},"inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["https:\/\/analystprep.com\/study-notes\/cfa-level-iii\/tax-considerations-and-private-client-investments\/"]}]},{"@type":"BreadcrumbList","@id":"https:\/\/analystprep.com\/study-notes\/cfa-level-iii\/tax-considerations-and-private-client-investments\/#breadcrumb","itemListElement":[{"@type":"ListItem","position":1,"name":"Home","item":"https:\/\/analystprep.com\/study-notes\/"},{"@type":"ListItem","position":2,"name":"Tax considerations and private client investments"}]},{"@type":"WebSite","@id":"https:\/\/analystprep.com\/study-notes\/#website","url":"https:\/\/analystprep.com\/study-notes\/","name":"CFA, FRM, and Actuarial Exams Study Notes","description":"Question Bank and Study Notes for the CFA, FRM, and Actuarial exams","potentialAction":[{"@type":"SearchAction","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/analystprep.com\/study-notes\/?s={search_term_string}"},"query-input":{"@type":"PropertyValueSpecification","valueRequired":true,"valueName":"search_term_string"}}],"inLanguage":"en-US"},{"@type":"Person","@id":"https:\/\/analystprep.com\/study-notes\/#\/schema\/person\/393e8b0a7757cde1d197fb0c060af25f","name":"Nicolas Joyce","image":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/secure.gravatar.com\/avatar\/684508c19e959bb01da12a9dc741428f559e4e5df43fc41ed68efa7f2d3b2b9d?s=96&d=mm&r=g","url":"https:\/\/secure.gravatar.com\/avatar\/684508c19e959bb01da12a9dc741428f559e4e5df43fc41ed68efa7f2d3b2b9d?s=96&d=mm&r=g","contentUrl":"https:\/\/secure.gravatar.com\/avatar\/684508c19e959bb01da12a9dc741428f559e4e5df43fc41ed68efa7f2d3b2b9d?s=96&d=mm&r=g","caption":"Nicolas Joyce"},"url":"https:\/\/analystprep.com\/study-notes\/author\/kajal\/"}]},"og_video":"https:\/\/www.youtube.com\/embed\/SXVPg1u4fuc","og_video_type":"text\/html","og_video_duration":"3218","og_video_width":"480","og_video_height":"270","ya_ovs_adult":"false","ya_ovs_upload_date":"2023-11-08T17:04:30+00:00","ya_ovs_allow_embed":"true"},"_links":{"self":[{"href":"https:\/\/analystprep.com\/study-notes\/wp-json\/wp\/v2\/posts\/33464","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/analystprep.com\/study-notes\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/analystprep.com\/study-notes\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/analystprep.com\/study-notes\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/analystprep.com\/study-notes\/wp-json\/wp\/v2\/comments?post=33464"}],"version-history":[{"count":5,"href":"https:\/\/analystprep.com\/study-notes\/wp-json\/wp\/v2\/posts\/33464\/revisions"}],"predecessor-version":[{"id":37223,"href":"https:\/\/analystprep.com\/study-notes\/wp-json\/wp\/v2\/posts\/33464\/revisions\/37223"}],"wp:attachment":[{"href":"https:\/\/analystprep.com\/study-notes\/wp-json\/wp\/v2\/media?parent=33464"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/analystprep.com\/study-notes\/wp-json\/wp\/v2\/categories?post=33464"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/analystprep.com\/study-notes\/wp-json\/wp\/v2\/tags?post=33464"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}