Question 1

One primary difference between corporate and U.S. Treasury bonds is:

Accepted Answer

A)  Interest from Treasury bonds is exempt from federal taxation. 
B)  Corporate bonds always pay interest periodically. 
C)  Treasury bonds always pay interest periodically. 
D)  Interest from corporate bonds is exempt from state taxation. 
E)  None of the choices are correct. 
A)  Interest from Treasury bonds is exempt from federal taxation. 
B)  Corporate bonds always pay interest periodically. 
C)  Treasury bonds always pay interest periodically. 
D)  Interest from corporate bonds is exempt from state taxation. 
E)  None of the choices are correct.

Question 2

Ms. Fresh bought 1,000 shares of Ibis Corporation stock for $5,000 on January 15, 2015.On December 31, 2017 she sold all 1,000 shares of her Ibis stock for $4,500. Based on a hot tip from her friend, she bought 1,000 shares of Ibis stock on January 23, 2018 for$3,000. What is Ms. Fresh's recognized loss on her 2017 sale and what is her basis in her1,000 shares purchased in 2018?

Accepted Answer

A)  $300 LTCL and $3,200 basis. 
B)  $200 LTCL and $3,300 basis. 
C)  $500 LTCL and $3,000 basis. 
D)  $400 LTCL and $3,100 basis. 
E)  $-0- LTCL and $3,500 basis. 
A)  $300 LTCL and $3,200 basis. 
B)  $200 LTCL and $3,300 basis. 
C)  $500 LTCL and $3,000 basis. 
D)  $400 LTCL and $3,100 basis. 
E)  $-0- LTCL and $3,500 basis.

Question 3

A taxpayer's at-risk amount in an activity is increased by:

Accepted Answer

A)  a reduction in the amount of debt related to the activity that the taxpayer is responsible for paying and cash distributions from the activity. 
B)  a reduction in the amount of debt related to the activity that the taxpayer is responsible for paying and cash contributions to the activity. 
C)  cash contributions to the activity. 
D)  cash distributions from the activity. 
E)  a reduction in the amount of debt related to the activity that the taxpayer is responsible for paying. 
A)  a reduction in the amount of debt related to the activity that the taxpayer is responsible for paying and cash distributions from the activity. 
B)  a reduction in the amount of debt related to the activity that the taxpayer is responsible for paying and cash contributions to the activity. 
C)  cash contributions to the activity. 
D)  cash distributions from the activity. 
E)  a reduction in the amount of debt related to the activity that the taxpayer is responsible for paying.

Question 4

How can electing to include long-term capital gains and qualifying dividends in the computation of net investment income be beneficial to taxpayers?

Accepted Answer

If taxpayers elect t

Question 5

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

Accepted Answer

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

Question 6

Which taxpayer would not be considered a material participant of an activity?

Accepted Answer

A)  taxpayer participated on a regular, continuous, and substantial basis last year 
B)  taxpayer participated in the activity for 995 hours last year 
C)  taxpayer materially participated in the activity for any five of the preceding ten years 
D)  taxpayer participated 95 hours last year and participation is not less than any other participants for the year 
E)  None of the choices are correct. 
A)  taxpayer participated on a regular, continuous, and substantial basis last year 
B)  taxpayer participated in the activity for 995 hours last year 
C)  taxpayer materially participated in the activity for any five of the preceding ten years 
D)  taxpayer participated 95 hours last year and participation is not less than any other participants for the year 
E)  None of the choices are correct.

Question 7

Dave and Jane file a joint return. They sell a capital asset at a $150,000 loss. Eventhough they have no capital gains, $6,000 of the loss can still be deducted in the current year.

Accepted Answer

A) True 
 B)False

Question 8

Long-term capital gains for individual taxpayers can be taxed at a maximum rate of:

Accepted Answer

A)  25 percent. 
B)  20 percent. 
C)  28 percent. 
D)  Both 20 percent and 28 percent. 
E)  All of the choices are correct. 
A)  25 percent. 
B)  20 percent. 
C)  28 percent. 
D)  Both 20 percent and 28 percent. 
E)  All of the choices are correct.

Question 9

Which of the following types of interest income is not taxed as it is earned?

Accepted Answer

A)  original issue discounts on corporate bonds 
B)  accrued market discount on bonds 
C)  interest from savings accounts 
D)  interest from money market accounts 
E)  All of the choices are correct. 
A)  original issue discounts on corporate bonds 
B)  accrued market discount on bonds 
C)  interest from savings accounts 
D)  interest from money market accounts 
E)  All of the choices are correct.

Question 10

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

Question 11

The capital gains (losses) netting process for taxpayers without 25 or 28 percent capitalgains requires them to (1) net short-term and long-term gains, (2) net short-term andlong-term losses, and (3) net the outcome to yield a final gain or loss to place on the tax return.

Accepted Answer

A) True 
 B)False

Question 12

Dan and Sue Hill file a joint tax return and elect to itemize their deductions. For 20X7, the Hills received the following income items: (1) $150,000 salary, (2) $3,000 long-term capital gain, and (3)$1,500 interest income. Other than these amounts, no other events or transactions affected their AGI in 20X7. During the same year, the Hills incurred the following expenses: (1) $500 tax preparation fees, (2) $4,000 investment expenses, and (3) $10,000 additional miscellaneous expenses. Assuming the Hills have a marginal tax rate of 30 percent, what is the tax benefit they receive from theinvestment expenses they paid?

Accepted Answer

Tax savings of $1,200 for the Hills rela

Question 13

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

Accepted Answer

A)  salary − active income/loss 
B)  rental real estate − passive income/loss 
C)  capital losses − passive income/loss 
D)  dividends − portfolio income/loss 
E)  All of the choices are correct. 
A)  salary − active income/loss 
B)  rental real estate − passive income/loss 
C)  capital losses − passive income/loss 
D)  dividends − portfolio income/loss 
E)  All of the choices are correct.

Question 14

When a taxable bond is issued at a premium, the taxpayer may elect to calculate andapply 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 15

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

Accepted Answer

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

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

Kevin bought 200 shares of Intel stock on January 1, 2017 for $50 per share with a brokerage fee of $100. Then, Kevin sells all 200 shares for $75 per share on December12, 2017. The brokerage fee on the sale was $150. What is the amount of the gain/lossKevin must report on his 2017 tax return?

Accepted Answer

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

Question 18

Losses associated with personal-use assets, sales to related parties, and wash sales are notcurrently deductible.

Accepted Answer

A) True 
 B)False

Question 19

Describe the three main loss limitations that taxpayers must overcome before deducting losses allocated to them from a specific activity.

Accepted Answer

Tax basis-limits the amount of deductibl

Question 20

What is the correct order of the loss limitation rules?

Accepted Answer

A)  passive loss limits, at-risk amount, tax basis 
B)  tax basis, at-risk amount, passive loss limits 
C)  passive loss limits, tax basis, at-risk amount 
D)  at-risk amount, tax basis, passive loss limits 
E)  tax basis, passive loss limits, at-risk amount 
A)  passive loss limits, at-risk amount, tax basis 
B)  tax basis, at-risk amount, passive loss limits 
C)  passive loss limits, tax basis, at-risk amount 
D)  at-risk amount, tax basis, passive loss limits 
E)  tax basis, passive loss limits, at-risk amount

Exam 7: Investments

One primary difference between corporate and U.S. Treasury bonds is:

A taxpayer's at-risk amount in an activity is increased by:

How can electing to include long-term capital gains and qualifying dividends in the computation of net investment income be beneficial to taxpayers?

Which taxpayer would not be considered a material participant of an activity?

Dave and Jane file a joint return. They sell a capital asset at a $150,000 loss. Eventhough they have no capital gains, $6,000 of the loss can still be deducted in the current year.

Long-term capital gains for individual taxpayers can be taxed at a maximum rate of:

Which of the following types of interest income is not taxed as it is earned?

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?

The capital gains (losses) netting process for taxpayers without 25 or 28 percent capitalgains requires them to (1) net short-term and long-term gains, (2) net short-term andlong-term losses, and (3) net the outcome to yield a final gain or loss to place on the tax return.

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 andapply the yearly amortization amount to reduce a portion of the actual interest payments that taxpayers include in gross income.

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

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

Kevin bought 200 shares of Intel stock on January 1, 2017 for $50 per share with a brokerage fee of $100. Then, Kevin sells all 200 shares for $75 per share on December12, 2017. The brokerage fee on the sale was $150. What is the amount of the gain/lossKevin must report on his 2017 tax return?

Losses associated with personal-use assets, sales to related parties, and wash sales are notcurrently deductible.

Describe the three main loss limitations that taxpayers must overcome before deducting losses allocated to them from a specific activity.

What is the correct order of the loss limitation rules?

An Introduction to Tax

Tax Compliance, the Irs, and Tax Authorities

Tax Planning Strategies and Related Limitations

Individual Income Tax Overview, Exemptions, 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 US Taxation of Multinational Transactions

Transfer Taxes and Wealth Planning

Filters