Exam 16: Investment and Personal Financial Planning

At the beginning of the year,Calvin paid $5,000 for 60 shares of Eddington stock.In June,he received a $300 cash distribution with respect to the stock.His Form 1099-DIV reported that $170 was an ordinary dividend and $130 was nontaxable.Compute Calvin's tax basis in his 60 shares at year-end.

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

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.

Mr.and Mrs.Holt made no taxable gifts during their lifetimes.Mrs.Holt died two years ago.Her estate tax return shows that she owed no estate tax and had an $800,000 unused lifetime exclusion.Mr.Hold died in 2017.The lifetime transfer tax exclusion available to his estate is $6,290,000.

Qualified dividend income earned by individual taxpayers is taxed at a maximum income tax rate of 20%.

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?

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.

Ruth Darma is a shareholder who is not involved in the day-to-day activities of an S corporation.Her interest in the business is a passive activity.

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?

Ms.Cowler owns stock in Serzo Inc.,an S corporation,and an interest in OTW Partnership.This year,Ms.Cowler had the following income and loss items. If Ms.Cowler's interests in Serzo and OTW are passive activities,compute her AGI.

Which of the following statements about Section 1244 stock is true?

An owner of undeveloped land held for investment must capitalize the property taxes paid on the land each year.

Material participation in a business activity means that the individual is involved in the day-to-day operations on a regular,continuous,and substantial basis.

Three years ago,Mr.Lewis paid $40,000 for a newly issued corporate bond with a $50,000 stated redemption value.This year,he sold the bond for $43,900.Through date of sale,Mr.Lewis recognized $940 of the original issue discount (OID)as accrued interest income.Compute his gain or loss on sale.

As a general tax planning rule,an individual should sell assets that have declined in value prior to death and keep appreciated property to transfer to his heirs at his death.

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.Sturm actively manage an office building that they purchased in January 1997.This year,the office building generated a $68,000 net loss.The couple's income items consisted of $72,300 salary and $14,000 interest and dividend income.How much of the rental loss is deductible this year?

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?

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 parent's marginal tax rate.

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