Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

Investment expenses and investment interest expense are for AGI deductions.

Accepted Answer

A) True 
 B)False

Question 3

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.

Accepted Answer

To be considered an active participant i

Question 4

Emily invested $60,000 into a 529 account on January 1,20X8 to fund her son's future schooling.Five years later,Emily needs this money to purchase a new car for the family.Her after-tax and penalty proceeds were $76,896.What is Emily's after-tax and penalty rate of return?

Accepted Answer

A) 5.1% 
B) 6.1% 
C) 7.1% 
D) 8.1% 
E) None of these 
A) 5.1% 
B) 6.1% 
C) 7.1% 
D) 8.1% 
E) None of these

Question 5

Kevin has the option of investing in a municipal bond that provides a 4.5 percent return or a taxable bond that provides a 7 percent return.Assuming Kevin's marginal tax rate is 35 percent,what investment should he choose and why?

Accepted Answer

A) Taxable bond;provides a 4.55 percent return versus 4.5 percent return for the municipal bond 
B) Taxable bond;provides a 7 percent return versus 4.5 percent return for the municipal bond 
C) Taxable bond;provides a 4.55 percent return versus 2.9 percent return for the municipal bond 
D) Municipal bond;provides a 4.5 percent return versus 4.2 percent return for the taxable bond 
E) None of these 
A) Taxable bond;provides a 4.55 percent return versus 4.5 percent return for the municipal bond 
B) Taxable bond;provides a 7 percent return versus 4.5 percent return for the municipal bond 
C) Taxable bond;provides a 4.55 percent return versus 2.9 percent return for the municipal bond 
D) Municipal bond;provides a 4.5 percent return versus 4.2 percent return for the taxable bond 
E) None of these

Question 6

John holds a taxable bond and a municipal bond.Which fees are considered part of John's investment expense?

Accepted Answer

A) attorney and accounting fees on municipal bond 
B) safe deposit box rental fees on taxable bond 
C) interest expense on taxable bond 
D) attorney and accounting fees on municipal bond and safe deposit box rental fees on taxable bond 
E) safe deposit box rental fees on taxable bond and interest expense on taxable bond 
A) attorney and accounting fees on municipal bond 
B) safe deposit box rental fees on taxable bond 
C) interest expense on taxable bond 
D) attorney and accounting fees on municipal bond and safe deposit box rental fees on taxable bond 
E) safe deposit box rental fees on taxable bond and interest expense on taxable bond

Question 7

Which of the following types of interest income is not taxed as it is earned?

Accepted Answer

A) interest from savings accounts 
B) original issue discounts on corporate bonds 
C) accrued market discount on bonds 
D) interest from money market accounts 
E) All of these 
A) interest from savings accounts 
B) original issue discounts on corporate bonds 
C) accrued market discount on bonds 
D) interest from money market accounts 
E) All of these

Question 8

In X8,Erin had the following capital gains (losses) from the sale of her investments: $2,000 LTCG,$25,000 STCG, ($9,000) LTCL,and ($15,000) STCL.What is the amount and nature of Erin's capital gains and losses?

Accepted Answer

A) $3,000 net short-term capital gain 
B) $3,000 net long-term capital loss 
C) $4,000 net short-term capital gain 
D) $4,000 net long-term capital loss 
E) None of these 
A) $3,000 net short-term capital gain 
B) $3,000 net long-term capital loss 
C) $4,000 net short-term capital gain 
D) $4,000 net long-term capital loss 
E) None of these

Question 9

Which of the following is not an example of the conversion tax planning strategy?

Accepted Answer

A) selling corporate bonds to purchase growth stocks 
B) selling U.S.Treasury bonds to purchase municipal bonds 
C) cashing in a certificate of deposit to purchase a stock paying qualified dividends 
D) withdrawing funds from a savings account to purchase a qualified small business stock 
E) None of these 
A) selling corporate bonds to purchase growth stocks 
B) selling U.S.Treasury bonds to purchase municipal bonds 
C) cashing in a certificate of deposit to purchase a stock paying qualified dividends 
D) withdrawing funds from a savings account to purchase a qualified small business stock 
E) None of these

Question 10

The Crane family recognized the following types of investment income during 20X6: (1) $1,500 qualified dividends, (2) $3,000 long-term capital gains,and (3) $850 taxable interest.Additionally,the Crane family has $500 in investment expenses and their other miscellaneous itemized deductions exceed 2% of their AGI for the year.The Crane family paid $3,333 in investment interest expense during 20X6.What is the best option for the Crane family if they want to maximize their deduction in 20X6 for investment interest expense? Show all possibilities.

Accepted Answer

Elect to include onl

Question 11

When calculating net investment income,gross investment income includes:

Accepted Answer

A) interest income 
B) net short-term capital gains 
C) non-qualified dividends 
D) royalty income 
E) All of these 
A) interest income 
B) net short-term capital gains 
C) non-qualified dividends 
D) royalty income 
E) All of these

Question 12

Capital loss carryovers for individuals are carried forward indefinitely.

Accepted Answer

A) True 
 B)False

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

Investment expenses and investment interest expense are for AGI deductions.

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.

Emily invested $60,000 into a 529 account on January 1,20X8 to fund her son's future schooling.Five years later,Emily needs this money to purchase a new car for the family.Her after-tax and penalty proceeds were $76,896.What is Emily's after-tax and penalty rate of return?

Kevin has the option of investing in a municipal bond that provides a 4.5 percent return or a taxable bond that provides a 7 percent return.Assuming Kevin's marginal tax rate is 35 percent,what investment should he choose and why?

John holds a taxable bond and a municipal bond.Which fees are considered part of John's investment expense?

Which of the following types of interest income is not taxed as it is earned?

In X8,Erin had the following capital gains (losses) from the sale of her investments: $2,000 LTCG,$25,000 STCG, ($9,000) LTCL,and ($15,000) STCL.What is the amount and nature of Erin's capital gains and losses?

Which of the following is not an example of the conversion tax planning strategy?

When calculating net investment income,gross investment income includes:

Capital loss carryovers for individuals are carried forward indefinitely.

An Introduction to Tax

Tax Compliance, the Irs, and Tax Authorities

Tax Planning Strategies and Related Limitations

Individual Tax Overview

Gross Income and Exclusions

Individual Deductions

Individual Income Tax Computation and Tax Credits

Business Income, Deductions, and Accounting Methods

Property Acquisition and Cost Recovery

Property Dispositions

Compensation

Retirement Savings and Deferred Compensation

Tax Consequences of Home Ownership

Filters

Exam 11: Investments

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

Investment expenses and investment interest expense are for AGI deductions.

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.

Emily invested $60,000 into a 529 account on January 1,20X8 to fund her son's future schooling.Five years later,Emily needs this money to purchase a new car for the family.Her after-tax and penalty proceeds were $76,896.What is Emily's after-tax and penalty rate of return?

Kevin has the option of investing in a municipal bond that provides a 4.5 percent return or a taxable bond that provides a 7 percent return.Assuming Kevin's marginal tax rate is 35 percent,what investment should he choose and why?

John holds a taxable bond and a municipal bond.Which fees are considered part of John's investment expense?

Which of the following types of interest income is not taxed as it is earned?

In X8,Erin had the following capital gains (losses) from the sale of her investments: $2,000 LTCG,$25,000 STCG, ($9,000) LTCL,and ($15,000) STCL.What is the amount and nature of Erin's capital gains and losses?

Which of the following is not an example of the conversion tax planning strategy?

When calculating net investment income,gross investment income includes:

Capital loss carryovers for individuals are carried forward indefinitely.

An Introduction to Tax

Tax Compliance, the Irs, and Tax Authorities

Tax Planning Strategies and Related Limitations

Individual Tax Overview

Gross Income and Exclusions

Individual Deductions

Individual Income Tax Computation and Tax Credits

Business Income, Deductions, and Accounting Methods

Property Acquisition and Cost Recovery

Property Dispositions

Compensation

Retirement Savings and Deferred Compensation

Tax Consequences of Home Ownership

Filters