Exam 16: Investment and Personal Financial Planning

The kiddie tax limits the tax savings from a transfer of income-producing property to a minor child by taxing a portion of such income at the tax rates applying to estates and trusts.

Ms.Poppe,a single taxpayer,made three gifts this year: $6,300 cash to her niece; $50,000 cash to Yale University; and 5,000 acres of land to her brother.Ms.Poppe's tax basis in the land was $400,000,and its fair market value of date of gift was $615,000.Compute Ms.Poppe's taxable gifts for the year.

Investment interest expense is an above-the-line deduction.

Lana owns 50 shares of stock qualifying as Section 1244 stock.If she sells the stock to George,he can also treat the stock as Section 1244 stock.

Mrs.Heyer inherited real estate from her mother.The mother's basis in the real estate was $382,000,and the fair market value at the date of the mother's death was $900,000.The mother's taxable estate was only $2.4 million,so the estate did not owe any federal estate tax.This year,Mrs.Heyer sold the real estate for $875,000.Compute her gain or loss recognized on sale.

Mr.Lainson died this year on a date when the total FMV of his property was $12 million and his debts totaled $450,000.His executor paid $15,000 of funeral expenses and $50,000 of accounting and legal fees to settle the estate.Mr.Lainson bequeathed $1 million to Villanova University,$200,000 to the Lutheran church,and $3.5 million to his surviving spouse.He left the remainder of the estate to his children.Compute Mr.Lainson's taxable estate.

The cash surrender value of a life insurance policy is taxable to the policy beneficiary upon the death of the insured individual.

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 1,000 of her 3,390 shares in 2019 for $22 per share and uses the average basis method,compute her recognized gain.

Mr.and Mrs.Perry own stock in an S corporation,which is their only passive activity.They have an $8,200 passive activity loss carryforward into this year.This year,the Perrys are allocated a $1,600 share of corporate ordinary business income.In December of this year,they recognize a $3,500 long-term capital gain on the sale of their entire stock interest.How much of their loss carryforward can the Perrys deduct this year?

All gratuitous transfers of property are subject to gift tax.

This year,Ms.Kwan recognized a $16,900 net long-term capital loss.Which of the following statements is true?

Revenue generated by the unearned income Medicare contribution tax is earmarked for the Medicare trust fund.

Individual taxpayers may carry nondeductible capital losses forward indefinitely up to the $3,000 maximum loss per year.

Twenty years ago,Mr.Wallace purchased a $250,000 insurance policy on his own life and named his daughter as sole beneficiary.He has paid $14,250 total premiums to keep this policy in force.This year,he liquidates the policy for its $20,000 cash surrender value.Which of the following statements is true?

Ms.Regga,a physician,earned $375,000 from her medical practice and $20,500 interest and qualified dividends from her investment portfolio.She was allocated a $67,000 loss from a passive activity.Compute Ms.Regga's AGI.

The interest earned on investments in U.S.debt obligations is subject to state taxation.

Ms.Martin received $80,000 from a $100,000 life insurance policy as an accelerated death benefit.None of the $80,000 is taxable to her.

Mr.and Mrs.Gupta want to make cash gifts to each of their four children,the children's four spouses,and three grandchildren.Compute the total amount that the Guptas can transfer to their younger-generation family members without making a taxable gift for the year.

Frederick Tims,a single individual,sold the following investment assets this year. If Frederick's preferential tax rate on adjusted capital gain is 15%,compute his tax attributable to the above sales.

Mr.and Mrs.Sturm actively manage an office building that they purchased in January 1997.This year,the office building generated a $68,000 net loss.The couple's income items consisted of $72,300 salary and $14,000 interest and dividend income.How much of the rental loss is deductible this year?