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Exam 7: Investments

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Question 31

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Which of the following is not a tax advantage of a Series EE savings bond?

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 C)
G) All of the above

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Question 32

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Describe the three main loss limitations that taxpayers must overcome before deducting losses allocated to them from a specific activity.

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Tax basis-limits the amount of deductibl...

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Question 33

Multiple Choice

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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:

The maximum amount of net capital losses individual taxpayers may deduct against their ordinary income per year is:

How are individual taxpayers' investment expenses and investment interest expense treated for tax purposes?

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?

Losses associated with personal-use assets, sales to related parties, and wash sales are not currently deductible.

Scott Bean is a computer programmer and incurred the following transactions last year. *Purchased when originally issued by Provo City. What is the net short-term capital gain/loss reported on the 2019 Schedule D? What is the net long-term capital gain/loss reported on the 2019 Schedule D? What amount of capital gain is subject to the preferential capital gains rate?

Alain Mire files a single tax return and has adjusted gross income of $304,000. His net investment income is $53,000. What is the additional tax that Alain will pay on his net investment income for the year?

On December 1, 20X7, George Jimenez needed a little extra cash for the upcoming holiday season, and sold 250 shares of Microsoft stock for $50 per share less a broker's fee of $200 for the entire sale transaction. Prior to the sale, George held the following blocks of Microsoft stock (associated broker's fee paid at the time of purchase). (Do not round intermediate calculations.) If his goal is to minimize his current capital gain, how much capital gain will George report from the sale?

What are the rules limiting the amount of capital losses a taxpayer may deduct in a given year? Name at least three.

Which taxpayer would not be considered a material participant of an activity?

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 for the year. The Crane family paid $3,333 in investment interest expense during 20X6. Calculate the different possibilities to determine the maximum deduction for investment interest expense for the Crane family in 20X6. From these possibilities, which provides the maximum deduction?

Kevin bought 200 shares of Intel stock on January 1, 2019, for $50 per share, with a brokerage fee of $100. Then, Kevin sells all 200 shares for $75 per share on December 12, 2019. The brokerage fee on the sale was $150. What is the amount of the gain/loss Kevin must report on his 2019 tax return?

A taxpayer's at-risk amount in an activity is increased by:

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.

When selling stocks, which method of calculating basis provides the greatest opportunity for minimizing gains or increasing losses?

Henry, a single taxpayer with a marginal tax rate of 35 percent (taxable income is $300,000 before considering any of the items below), sold the following assets during the year: *$25,000 of the gain is a 25 percent gain. The remaining gain is 0/15/20 percent gain. What tax rate(s)will apply to Henry's capital gains or losses?

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.

Bob Brain files a single tax return and decides to itemize his deductions. Bob's income for the year consists of $75,000 of salary, $3,000 long-term capital gain, and $1,500 interest income. Bob's expenses for the year consist of $800 in investment advice fees and $250 in tax return preparation fees. What is Bob's investment expense deduction?