Exam 16: Investment and Personal Financial Planning

In 2019,Mr.Ames,an unmarried individual,made a gift of real estate to his nephew.Compute the amount subject to the federal gift tax in each of the following situations. a.FMV of the real estate was $1.8 million,and the transfer was Mr.Ames' first taxable gift. b.FMV of the real estate was $17.25 million and the transfer was Mr.Ames' first taxable gift. c.FMV of the real estate was $12.3 million.Two years ago,Mr.Ames made his first taxable gift of marketable securities with a $3.92 million FMV in excess of the annual exclusion.

At the beginning of the year,Ms.Faro paid $15,000 for 750 shares of Gravois stock.She instructed her broker to reinvest any dividends in additional Gravois shares.Her Form 1099-DIV reported that she earned $820 dividend income which purchased 39 additional shares.Which of the following statements is true?

Mr.and Mrs.Bolt's joint return reports $267,500 AGI,which includes $13,300 net investment income.Compute the couple's unearned income Medicare contribution tax.

The unearned income Medicare contribution tax applies only to individual taxpayers whose marginal income tax rate is 37%.

Ms.Watts owns stock in two S corporations,MKP Corporation and Reynolds Inc.This year,Ms.Watts had the following income and loss items. If Ms.Watts materially participates in the business of both corporations,compute her AGI.

In 2017,Mrs.Owens paid $50,000 for 3,000 shares of a mutual fund and elected to reinvest year-end dividends in additional shares.In 2017 and 2018,she received Form 1099s reporting the following. If Mrs.Owens sells her 3,390 shares in 2019 for $22 per share,compute her recognized gain.

This year,Mr.and Mrs.Lebold paid $3,100 investment interest expense.They earned $4,750 investment income consisting of $1,900 interest and $2,850 qualified dividends.Which of the following statements is true?

Mr.Gordon,a resident of Pennsylvania,paid $20,000 for a bond issued by Delaware.This year,he received $800 of interest on the bond.His marginal state tax rate is 7%,and under Pennsylvania law,interest on debt obligations issued by another state is taxable.Mr.Gordon can deduct state income tax on his federal return,and his marginal federal tax rate is 35%.Compute his after-tax rate of return on the bond.

Unrecaptured Section 1250 gain is taxed at a maximum rate of 28%.

Mr.Gray recognized a $60,000 loss on sale of his entire interest in a passive activity.He had a $52,000 passive activity loss carryforward from prior years.Mr.Gray can deduct the $52,000 loss in the year of sale.

Ten years ago,Elaine paid $10 per share for 2,000 shares of Lazlo common stock.This year,Elaine learned that Lazlo is in bankruptcy and can pay only 40% of its outstanding debt.What are the tax consequences to Elaine of Lazlo's bankruptcy?

Which of the following does not reduce a decedent's taxable estate?

Which of the following statements about an investment in undeveloped land is false?

An owner of a life insurance policy that includes an investment element must recognize income equal to the annual increase in the policy's cash surrender value.

If an investor sells some of the securities in a block but can't identify which ones were sold,she is presumed to have sold the securities with the latest acquisition date.

Life insurance proceeds are includible in the taxable estate of the decedent if the decedent was the owner of the policy.

Up to $100,000 of loss recognized on the sale of Section 1244 stock by a married individual filing a joint return is characterized as ordinary loss.

Beverly earned a $75,000 salary and recognized a $7,200 loss on the sale of corporate stock this year.Compute her AGI in each of the following independent cases. a.Beverly had no other capital transactions this year. b.Beverly recognized a $13,500 capital gain on the sale of mutual fund shares. c.Beverly received a $9,500 capital gain distribution from a mutual fund and had a $3,200 capital loss carryforward from a previous year.

An inter vivos transfer is a gratuitous transfer of property by an individual that occurs at death.

Ms.Cowler owns stock in Serzo Inc.,an S corporation,and an interest in OTW Partnership.This year,Ms.Cowler had the following income and loss items. If Ms.Cowler's interests in Serzo and OTW are passive activities,compute her AGI.