Exam 11: Investments

Maximum yearly contributions per beneficiary to Coverdell Savings Accounts are limited to:

Brandon and Jane Forte file a joint tax return and decide to itemize their deductions. The Forte's income for the year consists of $120,000 in salary, $1,000 interest income, $1,500 nonqualifying dividends, and $1,000 long-term capital gains. The Forte's expenses for the year consist of $3,000 investment interest expense and $900 tax preparation fees. Assuming that the Forte's marginal tax rate is 30%, what is the amount of investment interest expense deduction for the year?

Tom, from Nebraska, and Jill, from Missouri, recently got married. To earn a decent return on all their wedding gifts, they decide to invest in some municipal bonds issued by the state of Missouri. Assuming they both qualify as Missouri residents, the bond interest Tom and Jill earn will be subject to the following taxes:

Generally, losses from rental activities are considered to be active losses.

Long-term capital gains can be taxed at a maximum rate of:

All life insurance proceeds given to the beneficiary at the time of death of the insured are excluded from gross income.

The investment interest expense deduction is limited to the amount of net investment income for the year.

Mr. and Mrs. Smith purchased 100 shares of stock for $45 per share on June 30, 20X6. On March 30, 20X8, the Smith family decides to sell these shares for $30 generating a loss of $15 per share. On April 15, 20X8, the Smith family realized they made a mistake and repurchased 100 shares for $35 per share. When will the Smith family receive a tax benefit for the loss on the March 30, 20X8 sale?

Nontax factor(s) investors should consider when choosing between investments include:

If Tom invests $60,000 in a taxable corporate bond that provides a 5 percent before-tax return, how much will Tom's investment be worth in either 8 or 20 years from now when the bond matures? Assume Tom's marginal tax rate is 35 percent.

What are the tax and nontax consequences associated with purchasing a whole life insurance policy on your life?

Nondeductible investment expenses (other than investment interest expenses) are carried forward indefinitely.

The longer the holding period on growth stocks, ____________ the after-tax rate of return.

Which of the following is not a tax advantage of a Series EE Saving Bond?

Given that losses from passive activities can only offset income from passive activities unless the passive activity is sold, what types of activities are not considered to be passive? Name at least three ways a taxpayer may be treated as an active participant in an activity.

When a bond is purchased in the secondary bond market at a discount, the amount of discount treated as interest income when the bond is sold prior to maturity is the:

Investment expenses and investment interest expense are for AGI deductions.

Cory recently sold his qualified small business stock (acquired in 2014) for $90,000 after holding it for ten years. His basis in the stock is $40,000. Assuming his marginal tax rate is 35 percent, how much tax will he owe on the sale?

§529 plans are limited to a yearly contribution of $2,000 for each beneficiary and can only be used to pay for qualified educational costs incurred from kindergarten through 12th grade.

Dan and Sue Hill file a joint tax return and elect to itemize their deductions. For 20X7, the Hills received the following income items: (1) $150,000 salary, (2) $3,000 long-term capital gain, and (3) $1,500 interest income. Other than these amounts, no other events or transactions affected their AGI in 20X7. During the same year, the Hills incurred the following expenses: (1) $500 tax preparation fees, (2) $4,000 investment expenses, and (3) $10,000 additional miscellaneous expenses. Assuming the Hills have a marginal tax rate of 30 percent, what is the tax benefit they receive from the investment expenses they paid?