Exam 16: Investment and Personal Financial Planning

The federal taxable estate of a decedent can exceed the value of the probate estate.

The interest earned on a state or local government bond is exempt from federal taxation.

Qualified dividend income earned by individual taxpayers is taxed at a maximum income tax rate of 20%.

In 2018,Mr.Yang paid $160,000 for a corporate bond with a $200,000 stated redemption value.Based on the bond's yield to maturity,amortization of the $40,000 discount was $3,024 in 2018 and $2,960 in 2019.Mr.Yang sold the bond for $169,500 in December 2019.What are his tax consequences in each year assuming that: a.He bought the newly issued bond from the corporation? b.He bought the bond in the public market through his broker?

Ms.Adair,a single individual,has $218,000 AGI,which includes $43,000 net investment income.Compute Ms.Adair's unearned income Medicare contribution tax.

Mr.McCann died this year.During his lifetime,he made taxable gifts significantly in excess of his lifetime transfer tax exclusion.Mr.McCann's taxable estate was $21.9 million.Compute the estate tax on this estate.

Two years ago,Mr.Young paid $40,000 to buy a publicly traded corporate bond through his broker.The bond's stated redemption value was $45,000.This year,Mr.Young sold the bond for $47,100.Compute and characterize his gain or loss on sale.

Mr.and Mrs.Holt made no taxable gifts during their lifetimes.Mrs.Holt died two years ago.Her estate tax return shows that she owed no estate tax and had an $800,000 unused lifetime exclusion.Mr.Hold died in 2019.The lifetime transfer tax exclusion available to his estate is $12.2 million.

Ms.Kerry,who itemized deductions on Schedule A,paid $15,000 interest on funds borrowed to acquire taxable bonds.Her AGI is $100,000,which includes $19,700 of interest income.How much of the interest expense can she deduct?