Question 1

The netting process for capital gains (losses)  with 0/15/20 percent, 25 percent, and 28 percent capital assets helps maximize the tax benefit of:

Accepted Answer

A)   current year net loss in the 25 percent rate group.
B)   net short-term capital losses.
C)   long-term capital loss carryovers.
D)   current year net loss in the 25 percent rate group and long-term capital loss carryovers.
E)   net short-term capital losses and long-term capital loss carryovers.F) B) and D)
G) All of the above

Question 2

Investment interest expense does not include:

Accepted Answer

A)   interest expense from loans to purchase municipal bonds.
B)   interest expense from loans to purchase corporate bonds.
C)   interest expense from loans to purchase stocks.
D)   interest expense from loans to purchase U.S. savings bonds and interest expense from loans to purchase corporate bonds.
E)   interest expense from loans to purchase corporate bonds and interest expense from loans to purchase stocks.F) C) and D)
G) B) and E)

Question 3

Judy, a single individual, reports the following items of income and loss:
  
Judy owns 100 percent of the rental property and actively participates in the rental of the property. Calculate Judy's AGI.

Accepted Answer

$105,000
S...

Question 4

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

Accepted Answer

A)   before-tax rates of return.
B)   after-tax rates of return.
C)   liquidity needs.
D)   before-tax rates of return and after-tax rates of return.
E)   before-tax rates of return and liquidity needs.F) A) and E)
G) D) and E)

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

In the current year, Norris, an individual, has $50,000 of ordinary income, a Net Short Term Capital Loss (NSTCL)  of $10,000 and a Net Long Term Capital Gain (NLTCG)  of $2,800. From his capital gains and losses, Norris reports:

Accepted Answer

A)   an offset against ordinary income of $10,000.
B)   an offset against ordinary income of $3,000 and a NSTCL carryforward of $7,000.
C)   an offset against ordinary income of $2,800 and a NSTCL carryforward of $7,200.
D)   an offset against ordinary income of $3,000 and a NSTCL carryforward of $7,200.
E)   an offset against ordinary income of $3,000 and a NSTCL carryforward of $4,200.F) None of the above
G) B) and D)

Question 7

Capital loss carryovers for individuals are carried forward indefinitely.

Accepted Answer

A) True 
 B)False

Question 8

Unused investment interest expense:

Accepted Answer

A)   expires after the current year.
B)   is carried back two years.
C)   is carried forward twenty years.
D)   is carried forward indefinitely.
E)   None of the choices are correct.F) B) and C)
G) B) and E)

Question 9

Two advantages of investing in capital assets are (1) gains are generally deferred and (2) gains are generally taxed at preferential rates.

Accepted Answer

A) True 
 B)False

Question 10

Generally, which of the following does not correctly categorize the type of income?

Accepted Answer

A)   Rental real estate − passive income/loss.
B)   Salary − active income/loss.
C)   Dividends − portfolio income/loss.
D)   Capital losses − passive income/loss.
E)   All of the choices are correct.F) All of the above
G) C) and D)

Question 11

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?

Accepted Answer

The Smith family will have a ($1,500) lo...

Question 12

Investment interest expense is a for AGI deduction.

Accepted Answer

A) True 
 B)False

Question 13

One primary difference between corporate and U.S. Treasury bonds is:

Accepted Answer

A)   Treasury bonds always pay interest periodically.
B)   Corporate bonds always pay interest periodically.
C)   Interest from Treasury bonds is exempt from federal taxation.
D)   Interest from corporate bonds is exempt from state taxation.
E)   None of the choices are correct.F) B) and C)
G) A) and B)

Question 14

Long-term capital gains (depending on type)  for individual taxpayers can be taxed at a maximum rate of:

Accepted Answer

A)   20 percent.
B)   25 percent.
C)   28 percent.
D)   Both 20 percent and 28 percent.
E)   All of the choices are correct.F) A) and B)
G) B) and E)

Question 15

Roy, a resident of Michigan, owns 25 percent of a fourplex in the nearby college town of Ann Arbor with three other friends. The fourplex is rented to students who attend the University of Michigan. Roy's responsibility is to approve new tenants each year and take care of any maintenance issues. During the year, the rental property generated a $25,000 loss, which was split equally among Roy and his three friends. Assuming Roy's only source of income was $145,000 of salary, how much of the rental loss can Roy deduct this year and what amount must be carried forward?

Accepted Answer

Current year deduction − $2,500 and carr...

Question 16

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 (tests) a taxpayer may be treated as an active participant in an activity.

Accepted Answer

To be considered an active participant i...

Question 17

Kevin bought 200 shares of Intel stock on January 1, 2018 for $50 per share with a brokerage fee of $100. Then, Kevin sells all 200 shares for $75 per share on December 12, 2018. The brokerage fee on the sale was $150. What is the amount of the gain/loss Kevin must report on his 2018 tax return?

Accepted Answer

A)   $4,500.
B)   $4,750.
C)   $5,000.
D)   $5,250.
E)   None of the choices are correct.F) B) and C)
G) B) and D)

Question 18

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

Accepted Answer

A)   Taxes are paid as the original issue discount on the bond is amortized.
B)   Interest earned is exempt from state taxation.
C)   Taxes are deferred until the bond is cashed in at maturity.
D)   Interest is exempt from federal taxation when used for qualifying educational expenses.
E)   None of the choices are correct.F) A) and B)
G) A) and C)

Question 19

Assume that Joe (single)  has a marginal tax rate of 37 percent and decides to make the election to include preferentially-taxed capital gains and qualified dividends as investment income. What rate must Joe use when calculating the tax on these two items?

Accepted Answer

A)   20%
B)   25%
C)   28%
D)   37%
E)   None of the choices are correct.F) A) and E)
G) C) and E)

Question 20

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

Accepted Answer

A) True 
 B)False

Exam 7: Investments

Assume that Joe (single) has a marginal tax rate of 37 percent and decides to make the election to include preferentially-taxed capital gains and qualified dividends as investment income. What rate must Joe use when calculating the tax on these two items?

Correct Answer
verified

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 (tests) a taxpayer may be treated as an active participant in an activity.

Correct Answer
verified
To be considered an active participant i...
View Answer

Unused investment interest expense:

Correct Answer
verified

Investment interest expense is a for AGI deduction.

Correct Answer
verified

Long-term capital gains (depending on type) for individual taxpayers can be taxed at a maximum rate of:

Correct Answer
verified

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

Correct Answer
verified

One primary difference between corporate and U.S. Treasury bonds is:

Correct Answer
verified

Kevin bought 200 shares of Intel stock on January 1, 2018 for $50 per share with a brokerage fee of $100. Then, Kevin sells all 200 shares for $75 per share on December 12, 2018. The brokerage fee on the sale was $150. What is the amount of the gain/loss Kevin must report on his 2018 tax return?

Correct Answer
verified

Generally, which of the following does not correctly categorize the type of income?

Correct Answer
verified

Two advantages of investing in capital assets are (1) gains are generally deferred and (2) gains are generally taxed at preferential rates.

Correct Answer
verified

Capital loss carryovers for individuals are carried forward indefinitely.

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

In the current year, Norris, an individual, has $50,000 of ordinary income, a Net Short Term Capital Loss (NSTCL) of $10,000 and a Net Long Term Capital Gain (NLTCG) of $2,800. From his capital gains and losses, Norris reports:

Correct Answer
verified

Correct Answer
verified
Current year deduction − $2,500 and carr...
View Answer

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

Correct Answer
verified

Investment interest expense does not include:

Correct Answer
verified

Correct Answer
verified
The Smith family will have a ($1,500) lo...
View Answer

Judy, a single individual, reports the following items of income and loss: Judy owns 100 percent of the rental property and actively participates in the rental of the property. Calculate Judy's AGI.

Correct Answer
verified
$105,000
S...
View Answer

The netting process for capital gains (losses) with 0/15/20 percent, 25 percent, and 28 percent capital assets helps maximize the tax benefit of:

Correct Answer
verified

Exam 7: Investments

Assume that Joe (single) has a marginal tax rate of 37 percent and decides to make the election to include preferentially-taxed capital gains and qualified dividends as investment income. What rate must Joe use when calculating the tax on these two items?

Correct AnswerverifiedShow Answer

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 (tests) a taxpayer may be treated as an active participant in an activity.

Correct AnswerverifiedTo be considered an active participant i...View AnswerShow Answer

Unused investment interest expense:

Correct AnswerverifiedShow Answer

Investment interest expense is a for AGI deduction.

Correct AnswerverifiedShow Answer

Long-term capital gains (depending on type) for individual taxpayers can be taxed at a maximum rate of:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

One primary difference between corporate and U.S. Treasury bonds is:

Correct AnswerverifiedShow Answer

Kevin bought 200 shares of Intel stock on January 1, 2018 for $50 per share with a brokerage fee of $100. Then, Kevin sells all 200 shares for $75 per share on December 12, 2018. The brokerage fee on the sale was $150. What is the amount of the gain/loss Kevin must report on his 2018 tax return?

Correct AnswerverifiedShow Answer

Generally, which of the following does not correctly categorize the type of income?

Correct AnswerverifiedShow Answer

Two advantages of investing in capital assets are (1) gains are generally deferred and (2) gains are generally taxed at preferential rates.

Correct AnswerverifiedShow Answer

Capital loss carryovers for individuals are carried forward indefinitely.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

In the current year, Norris, an individual, has $50,000 of ordinary income, a Net Short Term Capital Loss (NSTCL) of $10,000 and a Net Long Term Capital Gain (NLTCG) of $2,800. From his capital gains and losses, Norris reports:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedCurrent year deduction − $2,500 and carr...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

Investment interest expense does not include:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedThe Smith family will have a ($1,500) lo...View AnswerShow Answer

Judy, a single individual, reports the following items of income and loss: Judy owns 100 percent of the rental property and actively participates in the rental of the property. Calculate Judy's AGI.

Correct Answerverified$105,000S...View AnswerShow Answer

The netting process for capital gains (losses) with 0/15/20 percent, 25 percent, and 28 percent capital assets helps maximize the tax benefit of:

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified
To be considered an active participant i...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Current year deduction − $2,500 and carr...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The Smith family will have a ($1,500) lo...
View Answer

Correct Answer
verified
$105,000
S...
View Answer

Correct Answer
verified