Exam 16: Investment and Personal Financial Planning

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?

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

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 2016. The lifetime transfer tax exclusion available to his estate is $6,250,000.

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

In 2014, Mrs. Owens paid $50,000 for 3,000 shares of a mutual fund and elected to reinvest year-end dividends in additional shares. In 2014 and 2015, she received Form 1099s reporting the following. Reinverted dividendr Sharer purhared Pice per share Totaluharer owned 2014 \ 4,800 240 \ 20 3,240 2015 \ 3,150 150 \ 21 3,390 If Mrs. Owens sells her 3,390 shares in 2016 for $22 per share, compute her recognized gain.

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?

This year, Mr. Chester gave $50,000 to an old friend who has no legal obligation to repay the money. The entire $50,000 is a taxable gift.

Revenue generated by the unearned income Medicare contribution tax is earmarked for the Medicare trust fund.

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.

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.

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

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

Mr. Forest, a single taxpayer, recognized a $252,000 loss on the sale of Section 1244 stock. What is the character of this loss?

All gratuitous transfers of property are subject to gift tax.

In 2015, 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 2015 and $2,960 in 2016. Mr. Yang sold the bond for $169,500 in December 2016. 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. Johnson borrowed money to buy Chicago municipal bonds. This year, he paid $2,000 of interest on his loan and earned $3,500 of interest income from the bonds. None of the interest expense is deductible.

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

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

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.

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?