Question 1

An owner of undeveloped land held for investment must capitalize the property taxes paid on the land each year.

Accepted Answer

A) True 
 B)False  False

Question 2

Only accrual basis individuals are required to accrue original issue discount on a bond as annual interest income.

Accepted Answer

A) True 
 B)False  False

Question 3

Gain on sale of qualified small business stock is taxed at a maximum rate of 15%.

Accepted Answer

A) True 
 B)False  False

Question 4

Ms.Beal recognized a $42,400 net long-term capital gain and a $33,000 net short-term capital loss this year.What is her current net income tax cost from her capital transactions if her marginal rate on ordinary income is 37%?

Accepted Answer

A) $8,480 
B) $4,240 
C) $1,880 
D) $6,360 
A) $8,480 
B) $4,240 
C) $1,880 
D) $6,360

Question 5

In 2001,Mrs.Qualley,contributed $100,000 in exchange for 1,000 shares of Little Corporation,which is a qualified small business.This year,Mrs.Qualley's only capital transaction was the sale of the 1,000 shares of Little qualified small business stock for $180,000.If Mrs.Qualley's marginal rate on ordinary income is 37%,compute the income tax on her capital gain from this sale.

Accepted Answer

A) $6,000 
B) $11,200 
C) $22,400 
D) None of the above. 
A) $6,000 
B) $11,200 
C) $22,400 
D) None of the above.

Question 6

Income generated from an investment activity is primarily attributable to invested capital rather than the owner's personal involvement in the activity.

Accepted Answer

A) True 
 B)False

Question 7

This year,Mr.Chester gave $50,000 to an old friend who has no legal obligation to repay the money.The entire $50,000 is a taxable gift.

Accepted Answer

A) True 
 B)False

Question 8

Emil Nelson paid $174,500 for an annuity that will pay him $1,300 per month for life.Based on Emil's age,his expected return is $405,813.This year,Emil received 12 payments totaling $15,600.How much of this total is taxable income?

Accepted Answer

A) $0 
B) $5,300 
C) $6,708 
D) None of the above. 
A) $0 
B) $5,300 
C) $6,708 
D) None of the above.

Question 9

Gift tax is based on the donor's adjusted tax basis in the transferred property.

Accepted Answer

A) True 
 B)False

Question 10

The tax rate on capital gains is determined solely by reference to the capital asset's holding period.

Accepted Answer

A) True 
 B)False

Question 11

Jane,a cash basis individual,purchased a publicly traded bond at a $6,000 market discount.Which of the following statements is true?

Accepted Answer

A) Jane must accrue the market discount as interest income over the life of the bond. 
B) If Jane holds the bond to maturity,she will recognize a $6,000 capital gain. 
C) If Jane holds the bond to maturity,she will recognize $6,000 ordinary income. 
D) None of the statements is true. 
A) Jane must accrue the market discount as interest income over the life of the bond. 
B) If Jane holds the bond to maturity,she will recognize a $6,000 capital gain. 
C) If Jane holds the bond to maturity,she will recognize $6,000 ordinary income. 
D) None of the statements is true.

Question 12

Which of the following statements about investment property is false?

Accepted Answer

A) The term securities includes corporate stock,certificates of deposit,notes,bonds,and other debt instruments. 
B) Interest and dividends are taxed at the same rate as long-term capital gain. 
C) Interest on private activity bonds issued by a state or local government is excluded from ordinary income. 
D) A mutual fund is a diversified portfolio of securities owned and managed by a regulated investment company. 
A) The term securities includes corporate stock,certificates of deposit,notes,bonds,and other debt instruments. 
B) Interest and dividends are taxed at the same rate as long-term capital gain. 
C) Interest on private activity bonds issued by a state or local government is excluded from ordinary income. 
D) A mutual fund is a diversified portfolio of securities owned and managed by a regulated investment company.

Question 13

Which of the following statements about the individual capital gains and losses is false?

Accepted Answer

A) Gain on sale of Section 1231 depreciable real property is taxed at a 25% maximum rate. 
B) Short-term capital gains are taxed as ordinary income. 
C) Capital losses are deductible only against capital gains. 
D) Nondeductible capital losses are carried forward for deduction against future capital gains. 
A) Gain on sale of Section 1231 depreciable real property is taxed at a 25% maximum rate. 
B) Short-term capital gains are taxed as ordinary income. 
C) Capital losses are deductible only against capital gains. 
D) Nondeductible capital losses are carried forward for deduction against future capital gains.

Question 14

Mr.Johnson borrowed money to buy Chicago municipal bonds.This year,he paid $2,000 interest on his loan and earned $3,500 interest income from the bonds.None of the interest expense is deductible.

Accepted Answer

A) True 
 B)False

Question 15

Mr.and Mrs.Philips recognized the following capital gains and losses this year.   Their AGI before consideration of these gains and losses was $140,000.Compute their AGI.

Accepted Answer

A) $140,000 
B) $131,000 
C) $137,000 
D) $143,000 
A) $140,000 
B) $131,000 
C) $137,000 
D) $143,000

Question 16

Tom Johnson,whose marginal tax rate on ordinary income is 22%,sold four investment assets resulting in the following capital gains and losses.   How much of Tom's net capital gain is taxed at 15%?

Accepted Answer

A) $42,800 
B) $3,900 
C) $2,700 
D) $0 
A) $42,800 
B) $3,900 
C) $2,700 
D) $0

Question 17

Kate recognized a $25,700 net long-term capital gain and a $33,000 net short-term capital loss this year.What is her current net income tax cost or savings from her capital transactions if her marginal rate on ordinary income is 32%?

Accepted Answer

A) $0 
B) $960 net tax savings 
C) $2,336 net tax savings 
D) $3,450 net tax cost 
A) $0 
B) $960 net tax savings 
C) $2,336 net tax savings 
D) $3,450 net tax cost

Question 18

Mr.Forest,a single taxpayer,recognized a $252,000 loss on the sale of Section 1244 stock.What is the character of this loss?

Accepted Answer

A) $50,000 ordinary and $202,000 capital 
B) $100,000 ordinary and $152,000 capital 
C) $252,000 capital 
D) $252,000 ordinary 
A) $50,000 ordinary and $202,000 capital 
B) $100,000 ordinary and $152,000 capital 
C) $252,000 capital 
D) $252,000 ordinary

Question 19

Mr.and Mrs.Nelson operate a small business as a sole proprietorship.This year,they have the following tax information.   Compute Mr.and Mrs.Nelson's AGI.

Accepted Answer

A) $50,900 
B) $47,367 
C) $50,147 
D) None of the above 
A) $50,900 
B) $47,367 
C) $50,147 
D) None of the above

Question 20

An individual with a 10% rate marginal tax rate on ordinary income will pay no tax on long-term capital gains.

Accepted Answer

A) True 
 B)False

An owner of undeveloped land held for investment must capitalize the property taxes paid on the land each year.

Only accrual basis individuals are required to accrue original issue discount on a bond as annual interest income.

Gain on sale of qualified small business stock is taxed at a maximum rate of 15%.

Ms.Beal recognized a $42,400 net long-term capital gain and a $33,000 net short-term capital loss this year.What is her current net income tax cost from her capital transactions if her marginal rate on ordinary income is 37%?

Income generated from an investment activity is primarily attributable to invested capital rather than the owner's personal involvement in the activity.

This year,Mr.Chester gave $50,000 to an old friend who has no legal obligation to repay the money.The entire $50,000 is a taxable gift.

Emil Nelson paid $174,500 for an annuity that will pay him $1,300 per month for life.Based on Emil's age,his expected return is $405,813.This year,Emil received 12 payments totaling $15,600.How much of this total is taxable income?

Gift tax is based on the donor's adjusted tax basis in the transferred property.

The tax rate on capital gains is determined solely by reference to the capital asset's holding period.

Jane,a cash basis individual,purchased a publicly traded bond at a $6,000 market discount.Which of the following statements is true?

Which of the following statements about investment property is false?

Which of the following statements about the individual capital gains and losses is false?

Mr.Johnson borrowed money to buy Chicago municipal bonds.This year,he paid $2,000 interest on his loan and earned $3,500 interest income from the bonds.None of the interest expense is deductible.

Mr.and Mrs.Philips recognized the following capital gains and losses this year. Their AGI before consideration of these gains and losses was $140,000.Compute their AGI.

Tom Johnson,whose marginal tax rate on ordinary income is 22%,sold four investment assets resulting in the following capital gains and losses. How much of Tom's net capital gain is taxed at 15%?

Kate recognized a $25,700 net long-term capital gain and a $33,000 net short-term capital loss this year.What is her current net income tax cost or savings from her capital transactions if her marginal rate on ordinary income is 32%?

Mr.Forest,a single taxpayer,recognized a $252,000 loss on the sale of Section 1244 stock.What is the character of this loss?

Mr.and Mrs.Nelson operate a small business as a sole proprietorship.This year,they have the following tax information. Compute Mr.and Mrs.Nelson's AGI.

An individual with a 10% rate marginal tax rate on ordinary income will pay no tax on long-term capital gains.

Taxes and Taxing Jurisdictions

Policy Standards for a Good Tax

Taxes As Transaction Costs

Maxims of Income Tax Planning

Tax Research

Taxable Income From Business Operations

Property Acquisitions and Cost Recovery Deductions

Property Dispositions

Nontaxable Exchanges

Sole Proprietorships, partnerships, llcs, and S Corporations

The Corporate Taxpayer

The Choice of Business Entity

Jurisdictional Issues in Business Taxation

The Individual Tax Formula

Compensation and Retirement Planning

Tax Consequences of Personal Activities

The Tax Compliance Process

Filters

Exam 16: Investment and Personal Financial Planning

An owner of undeveloped land held for investment must capitalize the property taxes paid on the land each year.

Only accrual basis individuals are required to accrue original issue discount on a bond as annual interest income.

Gain on sale of qualified small business stock is taxed at a maximum rate of 15%.

Ms.Beal recognized a $42,400 net long-term capital gain and a $33,000 net short-term capital loss this year.What is her current net income tax cost from her capital transactions if her marginal rate on ordinary income is 37%?

Income generated from an investment activity is primarily attributable to invested capital rather than the owner's personal involvement in the activity.

This year,Mr.Chester gave $50,000 to an old friend who has no legal obligation to repay the money.The entire $50,000 is a taxable gift.

Emil Nelson paid $174,500 for an annuity that will pay him $1,300 per month for life.Based on Emil's age,his expected return is $405,813.This year,Emil received 12 payments totaling $15,600.How much of this total is taxable income?

Gift tax is based on the donor's adjusted tax basis in the transferred property.

The tax rate on capital gains is determined solely by reference to the capital asset's holding period.

Jane,a cash basis individual,purchased a publicly traded bond at a $6,000 market discount.Which of the following statements is true?

Which of the following statements about investment property is false?

Which of the following statements about the individual capital gains and losses is false?

Mr.Johnson borrowed money to buy Chicago municipal bonds.This year,he paid $2,000 interest on his loan and earned $3,500 interest income from the bonds.None of the interest expense is deductible.

Mr.and Mrs.Philips recognized the following capital gains and losses this year. Their AGI before consideration of these gains and losses was $140,000.Compute their AGI.

Tom Johnson,whose marginal tax rate on ordinary income is 22%,sold four investment assets resulting in the following capital gains and losses. How much of Tom's net capital gain is taxed at 15%?

Kate recognized a $25,700 net long-term capital gain and a $33,000 net short-term capital loss this year.What is her current net income tax cost or savings from her capital transactions if her marginal rate on ordinary income is 32%?

Mr.Forest,a single taxpayer,recognized a $252,000 loss on the sale of Section 1244 stock.What is the character of this loss?

Mr.and Mrs.Nelson operate a small business as a sole proprietorship.This year,they have the following tax information. Compute Mr.and Mrs.Nelson's AGI.

An individual with a 10% rate marginal tax rate on ordinary income will pay no tax on long-term capital gains.

Taxes and Taxing Jurisdictions

Policy Standards for a Good Tax

Taxes As Transaction Costs

Maxims of Income Tax Planning

Tax Research

Taxable Income From Business Operations

Property Acquisitions and Cost Recovery Deductions

Property Dispositions

Nontaxable Exchanges

Sole Proprietorships, partnerships, llcs, and S Corporations

The Corporate Taxpayer

The Choice of Business Entity

Jurisdictional Issues in Business Taxation

The Individual Tax Formula

Compensation and Retirement Planning

Tax Consequences of Personal Activities

The Tax Compliance Process

Filters