Exam 16: Investment and Personal Financial Planning

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

In 2011, 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 2011 and $2,960 in 2012. Mr. Yang sold the bond for $169,500 in 2013. 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?

The kiddie tax limits the tax savings from a transfer of income-producing property to a minor child by taxing a portion of such income at the parent's marginal tax rate.

Mrs. Lindt exchanged 212 shares of Nipher common stock for 773 shares of Newland common stock. Her basis in the Nipher 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?

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

Kate recognized a $25,700 net long-term capital gain and a $33,000 net short-term capital loss this year. What is her current net income tax cost or savings from her capital transactions if her marginal rate on ordinary income is 28%?

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

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 2013. The lifetime transfer tax exclusion available to his estate is $6,050,000.

An owner of a life insurance policy that includes an investment element must recognize income equal to the annual increase in the policy's cash surrender value.