Exam 16: Investment and Personal Financial Planning

Mr Vernon owns stock in two S corporations, Able Corporation and Benson Inc. This year, Mr Vernon had the following income and loss items. Salary $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$ $ 74,000 Business income from Able $\quad$$\quad$$\quad$ $ 20,000 Business loss from Benson $\quad$$\quad$$\quad$ $ (33,000 ) If Vernon materially participates in Able's business but not in Benson's business, compute his AGI.

Investment expenses are an itemized deduction.

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?

Martin received $80,000 from a $100,000 life insurance policy as an accelerated death benefit. None of the $80,000 is taxable to her.

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

Last year, Mr Margot purchased a limited interest in a business partnership, which is his only passive activity. Last year, he was allocated $14,900 of the partnership's ordinary business loss. This year, he was allocated $7,700 of the partnership's ordinary business income. Which of the following statements is false?

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

Mr and Mrs Golding own 13,850 shares in PTJ mutual fund. This year, they received a $6,390 cash distribution from PTJ. Which of the following statements is false?

Mr Johnson borrowed money to buy Chicago municipal bonds. This year, he paid $2,000 interest on his loan and earned $3,500 interest income from the bonds. None of the interest expense is deductible.

This year, Mr Chester gave $50,000 to an old friend who has no legal obligation to repay the money. The entire $50,000 is a taxable gift.

Which of the following statements about investment interest expense is true?

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 her 3,390 shares in 2018 for $22 per share, compute her recognized gain.

Twenty years ago, Mrs Cole purchased an insurance policy on her own life. Mrs Cole died this year, and the policy paid the $300,000 death benefit to her son Jeffrey. During her life, Mrs Cole paid total premiums of $71,200 on the policy. Which of the following statements is true?

Which of the following statements about the individual capital gains and losses is false?

Which of the following statements about the federal gift tax is false?

Up to $100,000 of loss recognized on the sale of Section 1244 stock by a married individual filing a joint return is characterized as ordinary loss.

Brokerage fees paid when stock is purchased are added to the basis of the stock.

Life insurance proceeds are includible in the taxable estate of the decedent if the decedent was the owner of the policy.

Mollani owns stock in two S corporations, Aloha and Honu. This year, she had the following income and loss items: Salary $ 45,000 Business income from Aloha $ 12,000 Business loss from Honu $ (17,000 ) Compute Ms. Mollani's AGI under each of the following assumptions. a. She materially participates in Aloha's business but not in Honu's business. b. She materially participates in Honu's business but not in Aloha's business. c. She materially participates in both corporate businesses. d. She does not materially participate in either business.