Question 1

Generally,which of the following does not correctly categorize the type of income?

Accepted Answer

A) Rental real estate - passive income/loss. 
B) Salary - active income/loss. 
C) Dividends - portfolio income/loss. 
D) Capital losses - passive income/loss. 
E) All of the choices are correct. 
A) Rental real estate - passive income/loss. 
B) Salary - active income/loss. 
C) Dividends - portfolio income/loss. 
D) Capital losses - passive income/loss. 
E) All of the choices are correct.

Question 2

When a taxable bond is issued at a premium,the taxpayer may elect to calculate and apply the yearly amortization amount to reduce a portion of the actual interest payments that taxpayers include in gross income.

Accepted Answer

A) True 
 B)False

Question 3

John holds a taxable bond and a municipal bond.Which are considered part of John's deductible investment interest expense?

Accepted Answer

A) Attorney and accounting fees on municipal bond. 
B) Safe deposit box rental fees on taxable bond. 
C) Interest expense on taxable bond. 
D) Interest expense on municipal bond. 
E) Interest expense on municipal bond and interest expense on taxable bond. 
A) Attorney and accounting fees on municipal bond. 
B) Safe deposit box rental fees on taxable bond. 
C) Interest expense on taxable bond. 
D) Interest expense on municipal bond. 
E) Interest expense on municipal bond and interest expense on taxable bond.

Question 4

The amount of interest income a taxpayer recognizes when he redeems a U.S.savings bond is:

Accepted Answer

A) the excess of the taxpayer's basis in the bonds over the bond proceeds. 
B) the bond proceeds. 
C) the excess of the bond proceeds over the taxpayer's basis in the bonds. 
D) the taxpayer's basis in the bonds. 
E) None of the choices are correct. 
A) the excess of the taxpayer's basis in the bonds over the bond proceeds. 
B) the bond proceeds. 
C) the excess of the bond proceeds over the taxpayer's basis in the bonds. 
D) the taxpayer's basis in the bonds. 
E) None of the choices are correct.

Question 5

What are the rules limiting the amount of capital losses a taxpayer may deduct in a given year? Name at least three.

Accepted Answer

First,a maximum of $3,000 of net capital

Question 6

In X8,Erin had the following capital gains (losses)from the sale of her investments: $2,000 LTCG,$25,000 STCG,($9,000)LTCL,and ($15,000)STCL.What is the amount and nature of Erin's capital gains and losses?

Accepted Answer

A) $3,000 net short-term capital gain. 
B) $3,000 net long-term capital loss. 
C) $4,000 net short-term capital gain. 
D) $4,000 net long-term capital loss. 
E) None of the choices are correct. 
A) $3,000 net short-term capital gain. 
B) $3,000 net long-term capital loss. 
C) $4,000 net short-term capital gain. 
D) $4,000 net long-term capital loss. 
E) None of the choices are correct.

Question 7

Doug and Sue Click file a joint tax return and decide to itemize their deductions.The Clicks' income for the year consists of $90,000 in salary,$2,000 interest income,and $800 long-term capital loss.The Clicks' expenses for the year consist of $1,500 investment interest expense.Assuming that the Clicks' marginal tax rate is 35 percent,what is the amount of their investment interest expense deduction for the year?

Accepted Answer

A) $1,200. 
B) $1,500. 
C) $2,000. 
D) $2,300. 
E) None of the choices are correct. 
A) $1,200. 
B) $1,500. 
C) $2,000. 
D) $2,300. 
E) None of the choices are correct.

Question 8

What is the tax treatment for qualified small business stock acquired in 2019 and held for more than five years,and what is the tax treatment if it is held for less than five years?

Accepted Answer

Qualified business stock is considered a

Question 9

Unrecaptured §1250 gain is taxed at the 28 percent preferential capital gains rate.

Accepted Answer

A) True 
 B)False

Question 10

The maximum amount of net capital losses individual taxpayers may deduct against their ordinary income per year is:

Accepted Answer

A) $3,000. 
B) $5,000. 
C) $0,losses are not deductible. 
D) There is no maximum.All losses are allowed to be deducted. 
E) None of the choices are correct. 
A) $3,000. 
B) $5,000. 
C) $0,losses are not deductible. 
D) There is no maximum.All losses are allowed to be deducted. 
E) None of the choices are correct.

Question 11

On January 1,20X8,Jill contributed $18,000 of cash to the XYZ limited partnership for a 25 percent limited partnership interest.On April 6,20X8,XYZ limited partnership distributed $2,000 to Jill.For the year ended December 31,20X8,Jill received the following income/loss allocations from her partnership investments: (1)XYZ limited partnership allocated a $5,000 loss to Jill and (2)ABC limited partnership allocated $2,300 of income to Jill.How much of the $5,000 loss from XYZ limited partnership can Jill deduct in 20X8?

Accepted Answer

$2,300 of loss from XYZ is deducted in 2

Question 12

Investment income includes:

Accepted Answer

A) interest income. 
B) net short-term capital gains. 
C) nonqualified dividends. 
D) royalty income. 
E) All of the choices are correct. 
A) interest income. 
B) net short-term capital gains. 
C) nonqualified dividends. 
D) royalty income. 
E) All of the choices are correct.

Question 13

Passive losses that exceed passive income are deferred until the taxpayer generates passive income to offset these passive losses or until the taxpayer disposes of that activity.

Accepted Answer

A) True 
 B)False

Question 14

How are individual taxpayers' investment expenses and investment interest expense treated for tax purposes?

Accepted Answer

Investment expense: This is any expense

Question 15

Nontax factor(s)investors should consider when choosing among investments include:

Accepted Answer

A) before-tax rates of return. 
B) after-tax rates of return. 
C) liquidity needs. 
D) before-tax rates of return and after-tax rates of return. 
E) before-tax rates of return and liquidity needs. 
A) before-tax rates of return. 
B) after-tax rates of return. 
C) liquidity needs. 
D) before-tax rates of return and after-tax rates of return. 
E) before-tax rates of return and liquidity needs.

Question 16

A passive activity is any activity that involves a trade or business in which the taxpayer does not materially participate or any rental activity (unless the taxpayer is engaged in a real property trade or business).

Accepted Answer

A) True 
 B)False

Question 17

Kevin bought 200 shares of Intel stock on January 1,2019,for $50 per share,with a brokerage fee of $100.Then,Kevin sells all 200 shares for $75 per share on December 12,2019.The brokerage fee on the sale was $150.What is the amount of the gain/loss Kevin must report on his 2019 tax return?

Accepted Answer

A) $4,500. 
B) $4,750. 
C) $5,000. 
D) $5,250. 
E) None of the choices are correct. 
A) $4,500. 
B) $4,750. 
C) $5,000. 
D) $5,250. 
E) None of the choices are correct.

Question 18

In the current year,Norris,an individual,has $50,000 of ordinary income,a net short-term capital loss (NSTCL)of $10,000,and a net long-term capital gain (NLTCG)of $2,800.From his capital gains and losses,Norris reports:

Accepted Answer

A) an offset against ordinary income of $10,000. 
B) an offset against ordinary income of $3,000 and an NSTCL carryforward of $7,000. 
C) an offset against ordinary income of $2,800 and an NSTCL carryforward of $7,200. 
D) an offset against ordinary income of $3,000 and an NSTCL carryforward of $7,200. 
E) an offset against ordinary income of $3,000 and an NSTCL carryforward of $4,200. 
A) an offset against ordinary income of $10,000. 
B) an offset against ordinary income of $3,000 and an NSTCL carryforward of $7,000. 
C) an offset against ordinary income of $2,800 and an NSTCL carryforward of $7,200. 
D) an offset against ordinary income of $3,000 and an NSTCL carryforward of $7,200. 
E) an offset against ordinary income of $3,000 and an NSTCL carryforward of $4,200.

Question 19

Net investment income is always less than gross investment income.

Accepted Answer

A) True 
 B)False

Question 20

Interest earned on U.S.savings bonds is interest received at sale or maturity but must be taxed annually.

Accepted Answer

A) True 
 B)False

Exam 7: Investments

Generally,which of the following does not correctly categorize the type of income?

When a taxable bond is issued at a premium,the taxpayer may elect to calculate and apply the yearly amortization amount to reduce a portion of the actual interest payments that taxpayers include in gross income.

John holds a taxable bond and a municipal bond.Which are considered part of John's deductible investment interest expense?

The amount of interest income a taxpayer recognizes when he redeems a U.S.savings bond is:

What are the rules limiting the amount of capital losses a taxpayer may deduct in a given year? Name at least three.

In X8,Erin had the following capital gains (losses)from the sale of her investments: $2,000 LTCG,$25,000 STCG,($9,000)LTCL,and ($15,000)STCL.What is the amount and nature of Erin's capital gains and losses?

What is the tax treatment for qualified small business stock acquired in 2019 and held for more than five years,and what is the tax treatment if it is held for less than five years?

Unrecaptured §1250 gain is taxed at the 28 percent preferential capital gains rate.

The maximum amount of net capital losses individual taxpayers may deduct against their ordinary income per year is:

Investment income includes:

Passive losses that exceed passive income are deferred until the taxpayer generates passive income to offset these passive losses or until the taxpayer disposes of that activity.

How are individual taxpayers' investment expenses and investment interest expense treated for tax purposes?

Nontax factor(s)investors should consider when choosing among investments include:

A passive activity is any activity that involves a trade or business in which the taxpayer does not materially participate or any rental activity (unless the taxpayer is engaged in a real property trade or business).

Kevin bought 200 shares of Intel stock on January 1,2019,for $50 per share,with a brokerage fee of $100.Then,Kevin sells all 200 shares for $75 per share on December 12,2019.The brokerage fee on the sale was $150.What is the amount of the gain/loss Kevin must report on his 2019 tax return?

In the current year,Norris,an individual,has $50,000 of ordinary income,a net short-term capital loss (NSTCL)of $10,000,and a net long-term capital gain (NLTCG)of $2,800.From his capital gains and losses,Norris reports:

Net investment income is always less than gross investment income.

Interest earned on U.S.savings bonds is interest received at sale or maturity but must be taxed annually.

An Introduction to Tax

Tax Compliance,the Irs,and Tax Authorities

Tax Planning Strategies and Related Limitations

Individual Income Tax Overview,dependents,and Filing Status

Gross Income and Exclusions

Individual Deductions

Individual Income Tax Computation and Tax Credits

Business Income,deductions,and Accounting Methods

Property Acquisition and Cost Recovery

Property Dispositions

Compensation

Retirement Savings and Deferred Compensation

Tax Consequences of Home Ownership

Entities Overview

Corporate Operations

Accounting for Income Taxes

Corporate Taxation: Nonliquidating Distributions

Corporate Formation,reorganization,and Liquidation

Forming and Operating Partnerships

Dispositions of Partnership Interests and Partnership Distributions

S Corporations

State and Local Taxes

The Ustaxation of Multinational Transactions

Transfer Taxes and Wealth Planning

Filters