Exam 16: Investment and Personal Financial Planning

Ms.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.

Ms.Beal recognized a $42,400 net long-term capital gain and a $33,000 net short-term capital loss this year.What is her current net income tax cost from her capital transactions if her marginal rate on ordinary income is 39.6%?

The tax consequences of a business activity are generally the same as the tax consequences of an investment activity.

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

An inter vivos transfer is a gratuitous transfer of property by an individual that occurs at death.

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?

Cash basis individuals must accrue market discount on a bond as annual interest income over the life of the bond.

Two years ago,James loaned $60,000 to his friend.The debt is now uncollectible.If the loan created a bona fide debt,James recognizes a short-term capital loss.

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.

Fifteen years ago,Lenny purchased an insurance policy on his own life.The policy provides a $3 million death benefit.Lenny has paid $682,000 of premiums,and the cash surrender value of the policy is $725,000.He plans to liquidate the policy to generate cash for his business.If Lenny's marginal tax rate is 35%,how much after-tax cash will the liquidation generate?

The tax rate on capital gains is determined solely by reference to the capital asset's holding period.

Sixteen years ago,Ms.Herbert purchased an annuity for $96,000.Beginning in September of this year,the annuity began paying Ms.Herbert $4,000 per month for the rest of her life.Based on her age,Ms.Herbert's expected return is $300,000.How much of the $16,000 that she received this year is included in taxable income?

All gratuitous transfers of property are subject to gift tax.

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.

Mr.Vernon owns stock in two S corporations,Able Corporation and Benson Inc.This year,Mr.Vernon had the following income and loss items. If Vernon materially participates in Able's business but not in Benson's business,compute his AGI.

Investment expenses are a miscellaneous itemized deduction subject to the 2% AGI limitation.

Unrecaptured Section 1250 gain is taxed at a maximum rate of 28%.

Ms.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.

Investment interest expense is a miscellaneous itemized deduction subject to the 2% AGI limitation.

Mr.McCann died this year.During his lifetime,he made taxable gifts significantly in excess of his lifetime exclusion.Mr.McCann's taxable estate was $21.9 million.Compute the estate tax on this estate.