Exam 16: Investment and Personal Financial Planning

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 her 3,390 shares in 2017 for $22 per share,compute her recognized gain.

The interest earned on investments in U.S.debt obligations is subject to state taxation.

Mr.Ricardo exchanged 75 shares of Haslet common stock for 516 shares of Newland common stock pursuant to a reorganization of the two corporations.His basis in the Haslet stock was $49,200,and the fair market value of the Newland stock was $138,000.Which of the following statements about the exchange is true?

Which of the following statements about investment property is false?

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

Individual taxpayers are not allowed to deduct capital losses in excess of capital gains.

Mr.Adams paid $53,500 in premiums on a whole life insurance policy.When he canceled the policy,he received its cash surrender value of $61,600.He must recognize $61,600 of income as a result of the cancellation.

In 2016,Mr.Yang paid $160,000 for a corporate bond with a $200,000 stated redemption value.Based on the bond's yield to maturity,amortization of the $40,000 discount was $3,024 in 2016 and $2,960 in 2017.Mr.Yang sold the bond for $169,500 in December 2017.What are his tax consequences in each year assuming that: a.He bought the newly issued bond from the corporation? b.He bought the bond in the public market through his broker?

Mr.and Mrs.Philips recognized the following capital gains and losses this year. Their AGI before consideration of these gains and losses was $140,000.Compute their AGI.

Ten years ago,Elaine paid $10 per share for 2,000 shares of Lazlo common stock.This year,Elaine learned that Lazlo is in bankruptcy and can pay only 40% of its outstanding debt.What are the tax consequences to Elaine of Lazlo's bankruptcy?

Tom Johnson,whose marginal tax rate on ordinary income is 35%,sold four investment assets resulting in the following capital gains and losses. How much of Tom's net capital gain is taxed at 15%?

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

Mr.and Mrs.Nelson operate a small business as a sole proprietorship.This year,they have the following tax information. Compute Mr.and Mrs.Nelson's AGI.

Electing to reinvest dividends in additional shares of stock does not defer income recognition.

Beverly earned a $75,000 salary and recognized a $7,200 loss on the sale of corporate stock this year.Compute her AGI in each of the following independent cases. a.Beverly had no other capital transactions this year. b.Beverly recognized a $13,500 capital gain on the sale of mutual fund shares. c.Beverly received a $9,500 capital gain distribution from a mutual fund and had a $3,200 capital loss carryforward from a previous year.

Gift tax is based on the donor's adjusted tax basis in the transferred property.

Mr.and Mrs.Bolt's joint return reports $267,500 AGI,which includes $13,300 net investment income.Compute the couple's unearned income Medicare contribution tax.

Twenty years ago,Mr.Wallace purchased a $250,000 insurance policy on his own life and named his daughter as sole beneficiary.He has paid $14,250 total premiums to keep this policy in force.This year,he liquidates the policy for its $20,000 cash surrender value.Which of the following statements is true?

Bess gave her grandson ten acres of undeveloped land.Bess' tax basis in the land was $35,000,and its fair market value at date of gift was $175,000.Two years after receiving the land,the grandson sold it for $200,000.Compute his recognized gain on sale.

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?