Question 1

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 2

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 theseF) A) and D)
G) All of the above

Question 3

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 theseF) None of the above
G) A) and B)

Question 4

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 theseF) A) and B)
G) B) and C)

Question 5

Investment expenses and investment interest expense are for AGI deductions.

Accepted Answer

A) True 
 B)False

Question 6

Capital loss carryovers for individuals are carried forward indefinitely.

Accepted Answer

A) True 
 B)False

Question 7

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 theseF) All of the above
G) C) and E)

Question 8

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 theseF) A) and C)
G) B) and E)

Question 9

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 10

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

Accepted Answer

A) True 
 B)False

Question 11

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 theseF) B) and E)
G) A) and B)

Question 12

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 bondF) B) and D)
G) None of the above

Exam 11: Investments

Capital loss carryovers for individuals are carried forward indefinitely.

Correct Answer
verified

Correct Answer
verified
Elect to include onl...
View Answer

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

Correct Answer
verified

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?

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

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

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?

Correct Answer
verified

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?

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

Investment expenses and investment interest expense are for AGI deductions.

Correct Answer
verified

When calculating net investment income,gross investment income includes:

Correct Answer
verified

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

Correct Answer
verified

Exam 11: Investments

Capital loss carryovers for individuals are carried forward indefinitely.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedElect to include onl...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

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?

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

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

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?

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Investment expenses and investment interest expense are for AGI deductions.

Correct AnswerverifiedShow Answer

When calculating net investment income,gross investment income includes:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified
Elect to include onl...
View Answer

Correct Answer
verified

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified