Question 1

Which of the following statements about annuity contracts is true?

Accepted Answer

A) Annuity contracts provide a fixed income stream. 
B) Payments received from an annuity contract are tax-exempt. 
C) Payments received from an annuity contract are fully taxable as ordinary income. 
D) Payments received from an annuity contract are fully taxable as capital gain. 
A) Annuity contracts provide a fixed income stream. 
B) Payments received from an annuity contract are tax-exempt. 
C) Payments received from an annuity contract are fully taxable as ordinary income. 
D) Payments received from an annuity contract are fully taxable as capital gain. A

Question 2

In 2015,Mrs.Owens paid $50,000 for 3,000 shares of a mutual fund and elected to reinvest year-end dividends in additional shares.In 2015 and 2016,she received Form 1099s reporting the following.     If Mrs.Owens sells 1,000 shares in 2017 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 A

Question 3

Kate recognized a $25,700 net long-term capital gain and a $33,000 net short-term capital loss this year.What is her current net income tax cost or savings from her capital transactions if her marginal rate on ordinary income is 28%?

Accepted Answer

A) $0 
B) $840 net tax savings 
C) $2,044 net tax savings 
D) $3,015 net tax cost 
A) $0 
B) $840 net tax savings 
C) $2,044 net tax savings 
D) $3,015 net tax cost B

Question 4

An owner of a life insurance policy that includes an investment element must recognize income equal to the annual increase in the policy's cash surrender value.

Accepted Answer

A) True 
 B)False

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

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.

Accepted Answer

A) True 
 B)False

Question 7

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,and they incurred no investment expenses.Which of the following statements is true?

Accepted Answer

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

Question 8

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?

Accepted Answer

A) $0 
B) $9,100 
C) $25,000 
D) None of the above 
A) $0 
B) $9,100 
C) $25,000 
D) None of the above

Question 9

Mr.Lee made the following transfers this year.Which of the transfers are treated as gifts for federal tax purposes?

Accepted Answer

A) Political contribution to the Democratic party 
B) Charitable contribution to the United Way 
C) Payment to a hospital for the medical expenses of his 39-year old son 
D) None of the above are treated as gifts. 
A) Political contribution to the Democratic party 
B) Charitable contribution to the United Way 
C) Payment to a hospital for the medical expenses of his 39-year old son 
D) None of the above are treated as gifts.

Question 10

Ms.Adair,a single individual,has $218,000 AGI,which includes $43,000 net investment income.Compute Ms.Adair's unearned income Medicare contribution tax.

Accepted Answer

A) $0 
B) $684 
C) $817 
D) $1,634 
A) $0 
B) $684 
C) $817 
D) $1,634

Question 11

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

Accepted Answer

A) Gain on sale of Section 1231 depreciable real property is taxed at a 25% maximum rate. 
B) Short-term capital gains are taxed as ordinary income. 
C) Capital losses are deductible only against capital gains. 
D) Nondeductible capital losses are carried forward for deduction against future capital gains. 
A) Gain on sale of Section 1231 depreciable real property is taxed at a 25% maximum rate. 
B) Short-term capital gains are taxed as ordinary income. 
C) Capital losses are deductible only against capital gains. 
D) Nondeductible capital losses are carried forward for deduction against future capital gains.

Question 12

Mr.Quinn recognized a $900 net short-term capital gain and a $1,380 long-term capital gain this year.Which of the following statements is false?

Accepted Answer

A) If Mr.Quinn's marginal tax rate on ordinary income is 15%,the income tax on his capital gains is $135. 
B) If Mr.Quinn's marginal tax rate on ordinary income is 39.6%,the income tax on his capital gains is $632. 
C) Only $1,380 of the capital gain is subject to a preferential tax rate. 
D) None of the above is false. 
A) If Mr.Quinn's marginal tax rate on ordinary income is 15%,the income tax on his capital gains is $135. 
B) If Mr.Quinn's marginal tax rate on ordinary income is 39.6%,the income tax on his capital gains is $632. 
C) Only $1,380 of the capital gain is subject to a preferential tax rate. 
D) None of the above is false.

Question 13

Mr.Moyer owns residential rental property.This year,he received $7,000 revenue from the tenants and incurred $14,900 rental expenses.Mr.Moyer must include $7,000 in gross income and is allowed only $7,000 of above-the-line deductions for the expenses.

Accepted Answer

A) True 
 B)False

Question 14

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 15

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 16

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 17

The income generated from an investment activity is primarily attributable to invested capital rather than the owner's personal involvement in the activity.

Accepted Answer

A) True 
 B)False

Question 18

Ms.Kerry,who itemized deductions on Schedule A,paid $15,000 interest on funds borrowed to acquire taxable bonds.She also paid $660 of management fees that were fully deductible on Schedule A.Her AGI is $100,000,which includes $19,700 of interest income.How much of the interest expense can she deduct?

Accepted Answer

A) $0 
B) $19,040 
C) $19,700 
D) $15,000 
A) $0 
B) $19,040 
C) $19,700 
D) $15,000

Question 19

Gain on sale of qualified small business stock is taxed at a maximum rate of 15%.

Accepted Answer

A) True 
 B)False

Question 20

Ms.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.

Accepted Answer

A) $386,000 
B) $601,000 
C) $593,300 
D) $637,000 
A) $386,000 
B) $601,000 
C) $593,300 
D) $637,000

Which of the following statements about annuity contracts is true?

Kate recognized a $25,700 net long-term capital gain and a $33,000 net short-term capital loss this year.What is her current net income tax cost or savings from her capital transactions if her marginal rate on ordinary income is 28%?

An owner of a life insurance policy that includes an investment element must recognize income equal to the annual increase in the policy's cash surrender value.

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

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.

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,and they incurred no investment expenses.Which of the following statements is true?

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?

Mr.Lee made the following transfers this year.Which of the transfers are treated as gifts for federal tax purposes?

Ms.Adair,a single individual,has $218,000 AGI,which includes $43,000 net investment income.Compute Ms.Adair's unearned income Medicare contribution tax.

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

Mr.Quinn recognized a $900 net short-term capital gain and a $1,380 long-term capital gain this year.Which of the following statements is false?

Mr.Moyer owns residential rental property.This year,he received $7,000 revenue from the tenants and incurred $14,900 rental expenses.Mr.Moyer must include $7,000 in gross income and is allowed only $7,000 of above-the-line deductions for the expenses.

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

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

The income generated from an investment activity is primarily attributable to invested capital rather than the owner's personal involvement in the activity.

Gain on sale of qualified small business stock is taxed at a maximum rate of 15%.

Ms.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.

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

Which of the following statements about annuity contracts is true?

Kate recognized a $25,700 net long-term capital gain and a $33,000 net short-term capital loss this year.What is her current net income tax cost or savings from her capital transactions if her marginal rate on ordinary income is 28%?

An owner of a life insurance policy that includes an investment element must recognize income equal to the annual increase in the policy's cash surrender value.

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

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.

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,and they incurred no investment expenses.Which of the following statements is true?

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?

Mr.Lee made the following transfers this year.Which of the transfers are treated as gifts for federal tax purposes?

Ms.Adair,a single individual,has $218,000 AGI,which includes $43,000 net investment income.Compute Ms.Adair's unearned income Medicare contribution tax.

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

Mr.Quinn recognized a $900 net short-term capital gain and a $1,380 long-term capital gain this year.Which of the following statements is false?

Mr.Moyer owns residential rental property.This year,he received $7,000 revenue from the tenants and incurred $14,900 rental expenses.Mr.Moyer must include $7,000 in gross income and is allowed only $7,000 of above-the-line deductions for the expenses.

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

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

The income generated from an investment activity is primarily attributable to invested capital rather than the owner's personal involvement in the activity.

Gain on sale of qualified small business stock is taxed at a maximum rate of 15%.

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