Exam 16: Investment and Personal Financial Planning

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?

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.

Mr Gordon, a resident of Pennsylvania, paid $20,000 for a bond issued by Delaware. This year, he received $800 of interest on the bond. His marginal state tax rate is 7%, and under Pennsylvania law, interest on debt obligations issued by another state is taxable. Mr Gordon can deduct state income tax on his federal return, and his marginal federal tax rate is 37%. Compute his after-tax rate of return on the bond. 

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.

In 2018, Mr Ames, an unmarried individual, made a gift of real estate to his nephew. Compute the amount subject to the federal gift tax in each of the following situations. a. FMV of the real estate was $1.8 million, and the transfer was Mr Ames' first taxable gift. b. FMV of the real estate was $17.25 million and the transfer was Mr Ames' first taxable gift. c. FMV of the real estate was $12.3 million. Two years ago, Mr Ames made his first taxable gift of marketable securities with a $3.92 million FMV in excess of the annual exclusion.

Investors must hold qualified small business stock for more than five years in order to exclude a percentage of the gain on sale of such stock from gross income.

On April 19 of this year, Sandy learned that her stock investment had become worthless. The stock is deemed to be worthless on December 31 of this year.

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?

Mr Carp, a single taxpayer, recognized a $44,000 long-term capital gain, a $12,000 short-term capital gain, and a $10,000 long-term capital loss. Compute Mr Carp's 2018 income and Medicare contribution tax if his taxable income before consideration of his capital transactions is $465,000, none of which is investment income.

All gratuitous transfers of property are subject to gift tax.

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?

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

Mr and Mrs Bolt's joint return reports $267,500 AGI, which includes $13,300 net investment income. Compute the couple's unearned income Medicare contribution tax.

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

If an investor sells some of the securities in a block but can't identify which ones were sold, she is presumed to have sold the securities with the latest acquisition date.

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.

Lindsey owns and actively manages an apartment complex. This year, the complex generated a $40,300 net loss. If Lindsey's AGI before considering this loss is $118,200 and she owns no other passive activities, how much of the loss is deductible this year?

In 2016, Mrs Owens paid $50,000 for 3,000 shares of a mutual fund and elected to reinvest year-end dividends in additional shares. In 2016 and 2017, she received Form 1099s reporting the following. If Mrs Owens sells 1,000 shares in 2018 for $22 per share and uses the average basis method, compute her recognized gain.

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

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.