Question 1

The unearned income Medicare contribution tax complements the Medicare taxes imposed on earned income or employees and self-employed individuals.

Accepted Answer

A) True 
 B)False

Question 2

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

Accepted Answer

A) True 
 B)False

Question 3

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.Beverly had no other capital transactions this year.Beverly recognized a $13,500 capital gain on the sale of mutual fund shares.Beverly received a $9,500 capital gain distribution from a mutual fund and had a $3,200 capital loss carryforward from a previous year.

Accepted Answer

a. $72,000 AGI = $75,000 salary − $3,000

Question 4

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.

Accepted Answer

A)  $8.760 million 
B)  $6.660 million 
C)  $7.665 million 
D)  The facts are insufficient to compute the estate tax.
105) In 2019, 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 2019 and $2,960 in 2020. Mr. Yang sold the bond for $169,500 in December 2020. What are the tax consequences to Mr. Yang in each year assuming that: He bought the newly issued bond from the corporation?He bought the bond in the public market through his broker? 
A)  $8.760 million 
B)  $6.660 million 
C)  $7.665 million 
D)  The facts are insufficient to compute the estate tax.
105) In 2019, 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 2019 and $2,960 in 2020. Mr. Yang sold the bond for $169,500 in December 2020. What are the tax consequences to Mr. Yang in each year assuming that: He bought the newly issued bond from the corporation?He bought the bond in the public market through his broker?

Question 5

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?

Accepted Answer

A)  If the Lebolds elect to treat $1,200 of the qualified dividends as ordinary income not taxed at a preferential rate, they can deduct $3,100 investment interest expense. 
B)  The Lebolds can deduct $3,100 investment interest expense only if they elect to treat all of the $2,850 qualified dividends as ordinary income not taxed at a preferential rate. 
C)  The Lebolds can deduct $3,100 investment interest expense because their investment income exceeds $3,100. 
D)  The Lebolds' deduction for investment interest expense is limited to $1,900. 
A)  If the Lebolds elect to treat $1,200 of the qualified dividends as ordinary income not taxed at a preferential rate, they can deduct $3,100 investment interest expense. 
B)  The Lebolds can deduct $3,100 investment interest expense only if they elect to treat all of the $2,850 qualified dividends as ordinary income not taxed at a preferential rate. 
C)  The Lebolds can deduct $3,100 investment interest expense because their investment income exceeds $3,100. 
D)  The Lebolds' deduction for investment interest expense is limited to $1,900.

Question 6

Mrs. Lindt exchanged 212 shares of Nipher common stock for 773 shares of Newland common stock. Her basis in the Nipher stock was $49,200, and the fair market value of the Newland stock was $138,000. Which of the following statements about the exchange is true?

Accepted Answer

A)  Mrs. Lindt's basis in her Newland stock is $138,000. 
B)  Mrs. Lindt recognizes no gain on the exchange because she did not receive any cash. 
C)  If the exchange is pursuant to a reorganization of Nipher and Newland, Mrs. Lindt recognizes no gain. 
D)  None of these choices aretrue. 
A)  Mrs. Lindt's basis in her Newland stock is $138,000. 
B)  Mrs. Lindt recognizes no gain on the exchange because she did not receive any cash. 
C)  If the exchange is pursuant to a reorganization of Nipher and Newland, Mrs. Lindt recognizes no gain. 
D)  None of these choices aretrue.

Question 7

Ms. Lopez paid $7,260 interest on a mortgage on undeveloped land that she holds as an investment. Ms. Lopez's AGI is $112,200, which includes $4,900 interest income from a certificate of deposit. Which of the following statements is true?

Accepted Answer

A)  Ms. Lopez can't deduct any of the $7,260 interest expense. 
B)  Ms. Lopez can deduct $7,260 interest expense as an itemized deduction. 
C)  Ms. Lopez can deduct $4,900 interest expense as an itemized deduction. 
D)  Ms. Lopez can deduct $4,900 interest expense as an above-the-line deduction. 
A)  Ms. Lopez can't deduct any of the $7,260 interest expense. 
B)  Ms. Lopez can deduct $7,260 interest expense as an itemized deduction. 
C)  Ms. Lopez can deduct $4,900 interest expense as an itemized deduction. 
D)  Ms. Lopez can deduct $4,900 interest expense as an above-the-line deduction.

Question 8

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.

Accepted Answer

A)  $2,100 long-term capital gain. 
B)  $7,100 ordinary income. 
C)  $5,000 ordinary income and $2,100 long-term capital gain. 
D)  $7,100 long-term capital gain. 
A)  $2,100 long-term capital gain. 
B)  $7,100 ordinary income. 
C)  $5,000 ordinary income and $2,100 long-term capital gain. 
D)  $7,100 long-term capital gain.

Question 9

Ms. Plant owns and actively manages an apartment complex. This year, the complex generated a $32,790 net loss. If Ms. Plant's AGI before considering this loss is $196,100 and she owns no other passive activities, how much of the loss is deductible this year?

Accepted Answer

A)  $0 
B)  $25,000 
C)  $32,790 
D)  None of these choices are correct 
A)  $0 
B)  $25,000 
C)  $32,790 
D)  None of these choices are correct

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

Emil Nelson paid $174,500 for an annuity that will pay him $1,300 per month for life. Based on Emil's age, his expected return is $405,813. This year, Emil received 12 payments totaling $15,600. How much of this total is taxable income?

Accepted Answer

A)  $0 
B)  $5,300 
C)  $6,708 
D)  None of these choices are correct 
A)  $0 
B)  $5,300 
C)  $6,708 
D)  None of these choices are correct

Question 12

Six years ago, Mr. Ahmed loaned $10,000 to a neighbor in exchange for an interest-bearing debt obligation. This year, the neighbor informed Mr. Ahmed that he was defaulting on the debt. What are the tax consequences to Mr. Ahmed of this bad debt?

Accepted Answer

A)  $10,000 ordinary loss 
B)  $10,000 short-term capital loss 
C)  $10,000 long-term capital loss 
D)  No loss recognized 
A)  $10,000 ordinary loss 
B)  $10,000 short-term capital loss 
C)  $10,000 long-term capital loss 
D)  No loss recognized

Question 13

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.

Accepted Answer

A)  $105,000 
B)  $210,000 
C)  $165,000 
D)  $330,000 
A)  $105,000 
B)  $210,000 
C)  $165,000 
D)  $330,000

Question 14

Tom Johnson, whose marginal tax rate on ordinary income is 22%, sold four investment assets resulting in the following capital gains and losses. $\begin{array}{lll}
\text { Short-term capital gain } & \$ & 3,800 \
\text { Short-term capital loss } & \$ & (5,000) \
\text { Long-term capital gain } & \$ & 39,000 \
\text { Lonc-term capital loss } & \$ & (35,100)
\end{array}$ How much of Tom's net capital gain is taxed at 15%?

Accepted Answer

A)  $42,800 
B)  $3,900 
C)  $2,700 
D)  $0 
A)  $42,800 
B)  $3,900 
C)  $2,700 
D)  $0

Question 15

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

Accepted Answer

A)  The decedent's funeral expenses. 
B)  Testamentary transfers to charitable organizations. 
C)  Testamentary transfers to the decedent's spouse. 
D)  Testamentary transfers to the decedent's children. 
A)  The decedent's funeral expenses. 
B)  Testamentary transfers to charitable organizations. 
C)  Testamentary transfers to the decedent's spouse. 
D)  Testamentary transfers to the decedent's children.

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

Mr. Imhoff recognized a $25,700 net long-term capital gain and a $33,000 net short-term capital loss this year. What is his current year tax savings from the capital loss if his marginal rate on ordinary income is 35% and his preferential rate on adjusted net capital gain is 20%?

Accepted Answer

A)  $0 
B)  $6,190 tax savings 
C)  $1,050 tax savings 
D)  $7,695 tax cost 
A)  $0 
B)  $6,190 tax savings 
C)  $1,050 tax savings 
D)  $7,695 tax cost

Question 18

In 2018, Mrs. Owens paid $50,000 for 3,000 shares of a mutual fund and elected to reinvest year-end dividends in additional shares. In 2018 and 2019, she received Form 1099s reporting the following. $\begin{array}{rrrrr}
&\text { Reinvested } & \text { Shares } & \text { Price per } & \text { Total shares } \
&\text { dividends } & \text { purchased } & \text { share } & \text { owned }\
2018 & \$ 4,800 & 240 & \$ 20 & 3,240 \
2019 & \$ 3,150 & 150 & \$ 21 & 3,390
\end{array}$
 If Mrs. Owens sells 1,000 of her 3,390 shares in 2020 for $22 per share and uses the average basis method, compute her recognized gain.

Accepted Answer

A)  $4,910 
B)  $5,333 
C)  $3,883 
D)  $0 
A)  $4,910 
B)  $5,333 
C)  $3,883 
D)  $0

Question 19

Jane, a cash basis individual, purchased a publicly traded bond at a $6,000 market discount. Which of the following statements is true?

Accepted Answer

A)  Jane must accrue the market discount as interest income over the life of the bond. 
B)  If Jane holds the bond to maturity, she will recognize a $6,000 capital gain. 
C)  If Jane holds the bond to maturity, she will recognize $6,000 ordinary income. 
D)  None of these statements are true. 
A)  Jane must accrue the market discount as interest income over the life of the bond. 
B)  If Jane holds the bond to maturity, she will recognize a $6,000 capital gain. 
C)  If Jane holds the bond to maturity, she will recognize $6,000 ordinary income. 
D)  None of these statements are true.

Question 20

Individual taxpayers may carry nondeductible capital losses forward indefinitely.

Accepted Answer

A) True 
 B)False

The unearned income Medicare contribution tax complements the Medicare taxes imposed on earned income or employees and self-employed individuals.

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

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.

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?

Mrs. Lindt exchanged 212 shares of Nipher common stock for 773 shares of Newland common stock. Her basis in the Nipher stock was $49,200, and the fair market value of the Newland stock was $138,000. Which of the following statements about the exchange is true?

Ms. Lopez paid $7,260 interest on a mortgage on undeveloped land that she holds as an investment. Ms. Lopez's AGI is $112,200, which includes $4,900 interest income from a certificate of deposit. Which of the following statements is true?

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.

Ms. Plant owns and actively manages an apartment complex. This year, the complex generated a $32,790 net loss. If Ms. Plant's AGI before considering this loss is $196,100 and she owns no other passive activities, how much of the loss is deductible this year?

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

Emil Nelson paid $174,500 for an annuity that will pay him $1,300 per month for life. Based on Emil's age, his expected return is $405,813. This year, Emil received 12 payments totaling $15,600. How much of this total is taxable income?

Six years ago, Mr. Ahmed loaned $10,000 to a neighbor in exchange for an interest-bearing debt obligation. This year, the neighbor informed Mr. Ahmed that he was defaulting on the debt. What are the tax consequences to Mr. Ahmed of this bad debt?

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.

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

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

Mr. Imhoff recognized a $25,700 net long-term capital gain and a $33,000 net short-term capital loss this year. What is his current year tax savings from the capital loss if his marginal rate on ordinary income is 35% and his preferential rate on adjusted net capital gain is 20%?

Jane, a cash basis individual, purchased a publicly traded bond at a $6,000 market discount. Which of the following statements is true?

Individual taxpayers may carry nondeductible capital losses forward indefinitely.

Taxes and Taxing Jurisdictions

Policy Standards for a Good Tax

Taxes As Transaction Costs

Maxims of Income Tax Planning

Tax Research

Taxable Income From Business Operations

Property Acquisitions and Cost Recovery Deductions

Property Dispositions

Nontaxable Exchanges

Sole Proprietorships, Partnerships, Llcs, and S Corporations

The Corporate Taxpayer

The Choice of Business Entity

Jurisdictional Issues in Business Taxation

The Individual Tax Formula

Compensation and Retirement Planning

Tax Consequences of Personal Activities

The Tax Compliance Process

Filters

Exam 16: Investment and Personal Financial Planning

The unearned income Medicare contribution tax complements the Medicare taxes imposed on earned income or employees and self-employed individuals.

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

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.

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?

Mrs. Lindt exchanged 212 shares of Nipher common stock for 773 shares of Newland common stock. Her basis in the Nipher stock was $49,200, and the fair market value of the Newland stock was $138,000. Which of the following statements about the exchange is true?

Ms. Lopez paid $7,260 interest on a mortgage on undeveloped land that she holds as an investment. Ms. Lopez's AGI is $112,200, which includes $4,900 interest income from a certificate of deposit. Which of the following statements is true?

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.

Ms. Plant owns and actively manages an apartment complex. This year, the complex generated a $32,790 net loss. If Ms. Plant's AGI before considering this loss is $196,100 and she owns no other passive activities, how much of the loss is deductible this year?

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

Emil Nelson paid $174,500 for an annuity that will pay him $1,300 per month for life. Based on Emil's age, his expected return is $405,813. This year, Emil received 12 payments totaling $15,600. How much of this total is taxable income?

Six years ago, Mr. Ahmed loaned $10,000 to a neighbor in exchange for an interest-bearing debt obligation. This year, the neighbor informed Mr. Ahmed that he was defaulting on the debt. What are the tax consequences to Mr. Ahmed of this bad debt?

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.

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

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

Mr. Imhoff recognized a $25,700 net long-term capital gain and a $33,000 net short-term capital loss this year. What is his current year tax savings from the capital loss if his marginal rate on ordinary income is 35% and his preferential rate on adjusted net capital gain is 20%?

Jane, a cash basis individual, purchased a publicly traded bond at a $6,000 market discount. Which of the following statements is true?

Individual taxpayers may carry nondeductible capital losses forward indefinitely.

Taxes and Taxing Jurisdictions

Policy Standards for a Good Tax

Taxes As Transaction Costs

Maxims of Income Tax Planning

Tax Research

Taxable Income From Business Operations

Property Acquisitions and Cost Recovery Deductions

Property Dispositions

Nontaxable Exchanges

Sole Proprietorships, Partnerships, Llcs, and S Corporations

The Corporate Taxpayer

The Choice of Business Entity

Jurisdictional Issues in Business Taxation

The Individual Tax Formula

Compensation and Retirement Planning

Tax Consequences of Personal Activities

The Tax Compliance Process

Filters