Exam 16: Investment and Personal Financial Planning

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

Which of the following does not reduce a decedent's taxable estate?

The unearned income Medicare contribution tax applies only to individual taxpayers whose marginal income tax rate is 39.6%.

Ms. Adair, a single individual, has $218,000 AGI, which includes $43,000 net investment income. Compute Ms. Adair's unearned income Medicare contribution tax.

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?

Twenty years ago, Mrs. Cole purchased an insurance policy on her own life. Mrs. Cole died this year, and the policy paid the $300,000 death benefit to her son Jeffrey. During her life, Mrs. Cole paid total premiums of $71,200 on the policy. Which of the following statements is true?

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

In 2013, 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 2013 and $2,960 in 2014. Mr. Yang sold the bond for $169,500 in 2015. 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. Carp, a single taxpayer, recognized a $44,000 long-term capital gain, a $12,000 short-term capital gain, and a $10,000 long-term capital loss. Compute Mr. Carp's income and Medicare contribution tax if his taxable income before consideration of his capital transactions is $465,000, none of which is investment income.

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

The interest earned on a state or local government bond is exempt from federal taxation.

Investment interest expense is a miscellaneous itemized deduction subject to the 2% AGI limitation.

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

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

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.

Ms. Mollani owns stock in two S corporations, Aloha and Honu. This year, she had the following income and loss items: Compute Ms. Mollani's AGI under each of the following assumptions.

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.

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?

At the beginning of the year, Ms. Faro paid $15,000 for 750 shares of Gravois stock. She instructed her broker to reinvest any dividends in additional Gravois shares. Her Form 1099-DIV reported that she earned $820 dividend income which purchased 39 additional shares. Which of the following statements is true?

Unrecaptured Section 1250 gain is taxed at a maximum rate of 28%.