Certified Financial Planner (CFP) Practice Exam · Question
A client is considering selling a highly appreciated asset. To reduce the immediate tax impact, what strategy could a financial planner suggest?
Capital losses can be used to offset capital gains, reducing the overall taxable capital gain for the year and thus lowering the immediate tax impact.
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Question: A client is considering selling a highly appreciated asset. To reduce the immediate tax impact, what strategy could a financial planner suggest?
Answer options:
- Gifting the asset to a family member.
- Selling the asset and immediately reinvesting the proceeds. ✅ Harvesting capital losses from other investments to offset the capital gain.
- Transferring the asset to a TFSA.
Correct answer: Harvesting capital losses from other investments to offset the capital gain.
Explanation: Capital losses can be used to offset capital gains, reducing the overall taxable capital gain for the year and thus lowering the immediate tax impact.
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