Question 1

Which of the following statements about investment interest expense is true?

Accepted Answer

A)  The interest is allowed as an above-the-line deduction. 
B)  The interest is allowed as a miscellaneous itemized deduction. 
C)  Nondeductible interest carries forward into future years. 
D)  The interest is deductible to the extent of the individual's gross investment income. 
A)  The interest is allowed as an above-the-line deduction. 
B)  The interest is allowed as a miscellaneous itemized deduction. 
C)  Nondeductible interest carries forward into future years. 
D)  The interest is deductible to the extent of the individual's gross investment income.

Question 2

This year, Ms. Kwan recognized a $16,900 net long-term capital loss. Which of the following statements is true?

Accepted Answer

A)  Ms. Kwan has a $16,900 long-term capital loss carryforward into future years. 
B)  Ms. Kwan has a $16,900 nondeductible loss that she can carry back three years and forward five years. 
C)  Ms. Kwan can deduct $3,000 of the loss as an itemized deduction. 
D)  None of the above is true. 
A)  Ms. Kwan has a $16,900 long-term capital loss carryforward into future years. 
B)  Ms. Kwan has a $16,900 nondeductible loss that she can carry back three years and forward five years. 
C)  Ms. Kwan can deduct $3,000 of the loss as an itemized deduction. 
D)  None of the above is true.

Question 3

Mr. and Mrs. Gupta want to make cash gifts to each of their four children, the children's four spouses, and three grandchildren (11 donees). Compute the total amount that the Guptas can transfer to their younger-generation family members without making a taxable gift for the year.

Accepted Answer

A)  $91,000 
B)  $182,000 
C)  $143,000 
D)  $286,000 
A)  $91,000 
B)  $182,000 
C)  $143,000 
D)  $286,000

Question 4

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.

Accepted Answer

A) True 
 B)False

Question 5

Frederick Tims, a single individual, sold the following investment assets this year.   If Frederick's marginal tax rate on ordinary income is 33%, compute his tax attributable to the above sales.

Accepted Answer

A)  $5,250 
B)  $3,450 
C)  $2,850 
D)  $0 
A)  $5,250 
B)  $3,450 
C)  $2,850 
D)  $0

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

Individual taxpayers may carry nondeductible capital losses forward indefinitely.

Accepted Answer

A) True 
 B)False

Question 8

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.

Accepted Answer

A)  $50,900 
B)  $47,367 
C)  $50,147 
D)  None of the above 
A)  $50,900 
B)  $47,367 
C)  $50,147 
D)  None of the above

Question 9

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.

Accepted Answer

A) True 
 B)False

Question 10

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 had the following sources of income   How much of the rental loss is deductible this year?

Accepted Answer

A)  $0 
B)  $14,000 
C)  $25,000 
D)  $68,000 
A)  $0 
B)  $14,000 
C)  $25,000 
D)  $68,000

Question 11

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?

Accepted Answer

A)  $20,000 long-term capital loss 
B)  $12,000 long-term capital loss 
C)  $20,000 ordinary loss 
D)  No gain or loss 
A)  $20,000 long-term capital loss 
B)  $12,000 long-term capital loss 
C)  $20,000 ordinary loss 
D)  No gain or loss

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

The cash surrender value of a life insurance policy is taxable to the policy beneficiary upon the death of the insured individual.

Accepted Answer

A) True 
 B)False

Question 14

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.

Accepted Answer

A)  $94,000 
B)  $74,000 
C)  $61,000 
D)  $41,000 
A)  $94,000 
B)  $74,000 
C)  $61,000 
D)  $41,000

Question 15

Ms. Poppe, a single taxpayer, made three gifts this year: $6,300 cash to her niece; $50,000 cash to Yale University; and 5,000 acres of land to her brother. Ms. Poppe's tax basis in the land was $400,000, and its fair market value of date of gift was $615,000. Compute Ms. Poppe's taxable gifts for the year.

Accepted Answer

A)  $387,000 
B)  $602,000 
C)  $621,300 
D)  $639,000 
A)  $387,000 
B)  $602,000 
C)  $621,300 
D)  $639,000

Question 16

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.

Accepted Answer

A) True 
 B)False

Question 17

In 2010, Mrs. Owens paid $50,000 for 3,000 shares of a mutual fund and elected to reinvest dividends in additional shares. In 2010 and 2011, she received Form 1099s reporting the following.   If Mrs. Owens sells her 3,390 shares in 2012 for $22 per share, compute her recognized gain.

Accepted Answer

A)  $24,580 
B)  $19,780 
C)  $16,630 
D)  $0 
A)  $24,580 
B)  $19,780 
C)  $16,630 
D)  $0

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

Which of the following statements about an investment in undeveloped land is false?

Accepted Answer

A)  An investor can elect to capitalize interest expense on a mortgage incurred to purchase the undeveloped land. 
B)  An investor can elect to capitalize property taxes on undeveloped land. 
C)  An investment in undeveloped land is considered a liquid asset. 
D)  Gain recognized on the sale of undeveloped land held as an investment is capital gain. 
A)  An investor can elect to capitalize interest expense on a mortgage incurred to purchase the undeveloped land. 
B)  An investor can elect to capitalize property taxes on undeveloped land. 
C)  An investment in undeveloped land is considered a liquid asset. 
D)  Gain recognized on the sale of undeveloped land held as an investment is capital gain.

Question 20

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.

Accepted Answer

A) True 
 B)False

Which of the following statements about investment interest expense is true?

This year, Ms. Kwan recognized a $16,900 net long-term capital loss. Which of the following statements is true?

Mr. and Mrs. Gupta want to make cash gifts to each of their four children, the children's four spouses, and three grandchildren (11 donees). Compute the total amount that the Guptas can transfer to their younger-generation family members without making a taxable gift for the year.

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.

Frederick Tims, a single individual, sold the following investment assets this year. If Frederick's marginal tax rate on ordinary income is 33%, compute his tax attributable to the above sales.

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

Individual taxpayers may carry nondeductible capital losses forward indefinitely.

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.

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.

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 had the following sources of income How much of the rental loss is deductible this year?

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?

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

The cash surrender value of a life insurance policy is taxable to the policy beneficiary upon the death of the insured individual.

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.

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.

In 2010, Mrs. Owens paid $50,000 for 3,000 shares of a mutual fund and elected to reinvest dividends in additional shares. In 2010 and 2011, she received Form 1099s reporting the following. If Mrs. Owens sells her 3,390 shares in 2012 for $22 per share, compute her recognized gain.

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

Which of the following statements about an investment in undeveloped land is false?

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.

Taxes and Taxing Jurisdictions

Policy Standards for a Good Tax

Taxes As Transaction Costs

Maxims of Income Tax Planning

Tax Research

Taxable Income From Business Operations

Property Acquisitions and Cost Recovery Deductions

Property Dispositions

Nontaxable Exchanges

Sole Proprietorships, Partnerships, Llcs, and S Corporations

The Corporate Taxpayer

The Choice of Business Entity

Jurisdictional Issues in Business Taxation

The Individual Tax Formula

Compensation and Retirement Planning

Tax Consequences of Personal Activities

The Tax Compliance Process

Filters

Exam 16: Investment and Personal Financial Planning

Which of the following statements about investment interest expense is true?

This year, Ms. Kwan recognized a $16,900 net long-term capital loss. Which of the following statements is true?

Mr. and Mrs. Gupta want to make cash gifts to each of their four children, the children's four spouses, and three grandchildren (11 donees). Compute the total amount that the Guptas can transfer to their younger-generation family members without making a taxable gift for the year.

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.

Frederick Tims, a single individual, sold the following investment assets this year. If Frederick's marginal tax rate on ordinary income is 33%, compute his tax attributable to the above sales.

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

Individual taxpayers may carry nondeductible capital losses forward indefinitely.

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.

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.

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 had the following sources of income How much of the rental loss is deductible this year?

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?

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

The cash surrender value of a life insurance policy is taxable to the policy beneficiary upon the death of the insured individual.

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.

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.

In 2010, Mrs. Owens paid $50,000 for 3,000 shares of a mutual fund and elected to reinvest dividends in additional shares. In 2010 and 2011, she received Form 1099s reporting the following. If Mrs. Owens sells her 3,390 shares in 2012 for $22 per share, compute her recognized gain.

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

Which of the following statements about an investment in undeveloped land is false?

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.

Taxes and Taxing Jurisdictions

Policy Standards for a Good Tax

Taxes As Transaction Costs

Maxims of Income Tax Planning

Tax Research

Taxable Income From Business Operations

Property Acquisitions and Cost Recovery Deductions

Property Dispositions

Nontaxable Exchanges

Sole Proprietorships, Partnerships, Llcs, and S Corporations

The Corporate Taxpayer

The Choice of Business Entity

Jurisdictional Issues in Business Taxation

The Individual Tax Formula

Compensation and Retirement Planning

Tax Consequences of Personal Activities

The Tax Compliance Process

Filters