Question 1

A beneficiary's basis of inherited property equals the decedent's adjusted basis immediately prior to death.

Accepted Answer

A) True 
 B)False

Question 2

Mrs Heyer inherited real estate from her mother. The mother's basis in the real estate was $382,000, and the fair market value at the date of the mother's death was $900,000. The mother's taxable estate was only $2.4 million, so the estate did not owe any federal estate tax. This year, Mrs Heyer sold the real estate for $875,000. Compute her gain or loss recognized on sale.

Accepted Answer

A)  $0 
B)  $25,000 loss 
C)  $493,000 gain 
D)  $875,000 gain 
A)  $0 
B)  $25,000 loss 
C)  $493,000 gain 
D)  $875,000 gain

Question 3

At the beginning of the year, Ms. Faro paid $15,000 for 750 shares of Gravois stock. She instructed her broker to reinvest any dividends in additional Gravois shares. Her Form 1099-DIV reported that she earned $820 dividend income which purchased 39 additional shares. Which of the following statements is true?

Accepted Answer

A)  Ms. Faro recognizes no dividend income and has a $15,000 basis in her 789 shares. 
B)  Ms. Faro recognizes no dividend income and has a $15,820 basis in her 789 shares. 
C)  Ms. Faro recognizes $820 dividend income and has a $15,820 basis in her 789 shares. 
D)  None of the above statements is true. 
A)  Ms. Faro recognizes no dividend income and has a $15,000 basis in her 789 shares. 
B)  Ms. Faro recognizes no dividend income and has a $15,820 basis in her 789 shares. 
C)  Ms. Faro recognizes $820 dividend income and has a $15,820 basis in her 789 shares. 
D)  None of the above statements is true.

Question 4

The cash surrender value of a life insurance policy is taxable to the policy beneficiary upon the death of the insured individual.

Accepted Answer

A) True 
 B)False

Question 5

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 6

In 2001, Mrs Qualley, contributed $100,000 in exchange for 1,000 shares of Little Corporation, which is a qualified small business. This year, Mrs Qualley's only capital transaction was the sale of the 1,000 shares of Little qualified small business stock for $180,000. If Mrs Qualley's marginal rate on ordinary income is 37%, compute the income tax on her capital gain from this sale.

Accepted Answer

A)  $6,000 
B)  $11,200 
C)  $22,400 
D)  None of the above. 
A)  $6,000 
B)  $11,200 
C)  $22,400 
D)  None of the above.

Question 7

In 1996, Mr Exton, a single taxpayer, contributed $30,000 in exchange for 100 shares of Morton stock. In 2005, he paid $43,000 to another shareholder to purchase 100 more shares of Morton stock. Morton stock qualified as Section 1244 stock when it was issued. This year, Mr Exton sold his 200 Morton shares for $250 per share. What is the amount and character of Mr Exton's recognized loss?

Accepted Answer

A)  $23,000 ordinary loss 
B)  $23,000 long-term capital loss 
C)  $3,000 long-term capital gain and $30,000 ordinary loss 
D)  $5,000 ordinary loss and $18,000 long-term capital loss. 
A)  $23,000 ordinary loss 
B)  $23,000 long-term capital loss 
C)  $3,000 long-term capital gain and $30,000 ordinary loss 
D)  $5,000 ordinary loss and $18,000 long-term capital loss.

Question 8

Only accrual basis individuals are required to accrue original issue discount on a bond as annual interest income.

Accepted Answer

A) True 
 B)False

Question 9

Regga, a physician, earned $375,000 from her medical practice and $20,500 interest and qualified dividends from her investment portfolio. She was allocated a $67,000 loss from a passive activity. Compute Ms. Regga's AGI.

Accepted Answer

A)  $328,500 
B)  $375,000 
C)  $395,500 
D)  None of the above 
A)  $328,500 
B)  $375,000 
C)  $395,500 
D)  None of the above

A beneficiary's basis of inherited property equals the decedent's adjusted basis immediately prior to death.

The cash surrender value of a life insurance policy is taxable to the policy beneficiary upon the death of the insured individual.

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.

Only accrual basis individuals are required to accrue original issue discount on a bond as annual interest income.

Regga, a physician, earned $375,000 from her medical practice and $20,500 interest and qualified dividends from her investment portfolio. She was allocated a $67,000 loss from a passive activity. Compute Ms. Regga's AGI.

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

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

A beneficiary's basis of inherited property equals the decedent's adjusted basis immediately prior to death.

The cash surrender value of a life insurance policy is taxable to the policy beneficiary upon the death of the insured individual.

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.

Only accrual basis individuals are required to accrue original issue discount on a bond as annual interest income.

Regga, a physician, earned $375,000 from her medical practice and $20,500 interest and qualified dividends from her investment portfolio. She was allocated a $67,000 loss from a passive activity. Compute Ms. Regga's AGI.

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

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