A $100,000 municipal bond is purchased by a financial institution in the secondary market at 90. For tax purposes, the institution opts to not accrete the bond. The bond has 10 years to maturity. The bond is sold after 4 years at 95. The tax consequence i
The best answer is D.
Since these discount bonds are purchased in the secondary market, the market discount that is earned over the life of the bonds is treated as taxable interest income. This is nothing more than a "tax grab" by the Federal government -
Which of the following statements are TRUE regarding gift and estate taxes?
I Gift and estate taxes are regressive taxes
II Gifts valued up to $15,000 per person in 2018 are excluded from tax
III The first $5,600,000 of an estate for year 2018 is excluded
The best answer is C. Gift and estate tax rates increase with the size of gift or estate - this is known as a progressive tax. Regressive taxes are flat taxes. Gifts of up to $15,000 per person in 2018 are excluded from the tax. The first $5,000,000 of an
A customer has written 1 ABC Jan 50 Put @ $3. The contract is exercised. The tax consequence to the writer is a:
Correct Answer A. cost basis of $4,700
B. sale proceeds of $4,700
C. cost basis of $5,300
Incorrect Answer D. sale proceeds of $5,300
The best answer is A. If the writer of a put is exercised, he must buy the stock at the strike price. The premium received is a reduction of the cost of buying the stock. The writer of the put must buy 100 shares at $50 ($5,000), but he or she received $3
A customer buys 10M of $1,000 par corporate bonds in the secondary market. The purchase confirmation shows that the customer paid 90 + $150 of accrued interest. Six months later, the customer sells the bonds in the market at 91 + $50 of accrued interest.
The best answer is B.
The accrued interest on a bond has no bearing on the capital gain or loss that results from the liquidation of a position. Rather, the accrued interest is an adjustment to interest income paid or received for that tax year. These bon
A customer buys 200 shares of PDQ stock at $60 per share. The customer then sells 3 PDQ Call contracts for total premiums of $1,500. The call contracts expire unexercised. After expiration, the customer's cost basis in the PDQ shares is:
Incorrect Answer
The best answer is C. The expiration of the call contracts results in a short term capital gain to the writer of $1,500, taxable in the year of expiration. The cost basis of the stock position is unaffected at $60 per share, for a total cost basis for 200
Which type of real estate limited partnership offers a deferred depreciation benefit?
Correct Answer A. New Construction
B. Raw Land
Incorrect Answer C. Existing Housing
D. All of the above
The best answer is A. Raw land is not depreciable; only the building on the land is depreciable. Existing housing is immediately depreciable. New construction is only depreciable after the building is completed - during the building phase, no depreciation
Which of the following will increase the tax basis of a limited partnership interest?
I Cash contribution to the partnership
II Assumption of recourse debt by the partner
III Assumption of non-recourse financing for real estate programs only
IV Distributi
The best answer is D. The "basis" is the theoretical value of the investment in the partnership. The "basis" amount establishes the limit of tax deductions that may be taken by the partner - so the larger the basis, the better it is for the partner.
Cash
If an investor sells stock short, and covers the position at a profit more than 12 months later, the gain will be taxed as:
Correct Answer A. a short term capital gain
Incorrect Answer B. a long term capital gain
C. passive income
D. earned income
The best answer is A. When an individual sells stock short, a holding period is never established. Because of this, all gains and losses are always short term.
The amount of accretion to be reported for tax purposes on an original issue discount bond requires the use of all of the following EXCEPT:
A. purchase price
Correct Answer B. market value
Incorrect Answer C. redemption price
D. maturity
The best answer is B. Annual accretion of an original issue discount bond for tax purposes is based upon the difference between the issue price and redemption price, accreted over the number of years to maturity. The market value has no bearing on the ann
Which statements are TRUE regarding dividend and capital gain distributions made by mutual funds?
I Capital gains are only taxable in the year they are distributed if they are not reinvested in additional shares of the mutual fund
II Capital gains are tax
The best answer is D. Mutual fund capital gains and dividend distributions are taxable to the shareholder in the year they are distributed by the fund, whether or not the distributions are automatically reinvested in new fund shares.
Which of the following statements are TRUE regarding original issue municipal bonds?
I Municipal original issue discount bonds must be accreted
II Municipal original issue discount bonds may be accreted
III Municipal original issue premium bonds must be a
The best answer is A.
The discount on original issue discount municipal bonds must be accreted annually. It is reported annually as municipal interest income earned (non-taxable), and the cost basis of the bond is adjusted upwards by this amount. If the b
When performing a municipal bond tax swap, the investor is:
I selling existing bonds at a gain
II selling existing bonds at a loss
III using the proceeds from the sale to buy the same bonds back
IV using the proceeds from the sale to buy similar, but not
The best answer is D. When performing a municipal bond tax swap, the investor is selling existing bonds at a loss and using the proceeds to buy similar, but not identical bonds so that the loss deduction is allowed under the "wash sale rule".
Which statements are TRUE about stock cost basis reporting?
I Stock cost basis is reported on Form 1099-DIV
II Stock cost basis is reported on Form 1099-B
III If there are multiple purchases of the stock and no instructions are received from the customer,
The best answer is C. Cost basis reporting to the IRS is required on Form 1099-B. The Form includes the cost basis of the security, the sale proceeds, and whether the holding period is short term or long term. If there are multiple purchases of the stock
Which of the following are regressive taxes?
I Estate and Gift Tax
II Sales Tax
III Excise Tax
IV Income Tax
A. I and IV only
Correct Answer B. II and III only
Incorrect Answer C. I, II, III
D. I, II, III, IV
The best answer is B. Sales and excise tax rates are constant, regardless of the dollar amount involved, so they are regressive. Estate and gift tax rates increase with the size of the gift or estate, so they are progressive. Income tax rates increase wit
A $100,000 municipal bond is purchased by a financial institution in the secondary market at 90. For tax purposes, the institution opts to not accrete the bond. The bond has 10 years to maturity. The bond is sold after 4 years at 95. The tax consequence i
The best answer is D.
Since these discount bonds are purchased in the secondary market, the market discount that is earned over the life of the bonds is treated as taxable interest income. This is nothing more than a "tax grab" by the Federal government -
Which of the following statements are TRUE regarding gift and estate taxes?
I Gift and estate taxes are regressive taxes
II Gifts valued up to $15,000 per person in 2018 are excluded from tax
III The first $5,600,000 of an estate for year 2018 is excluded
The best answer is C. Gift and estate tax rates increase with the size of gift or estate - this is known as a progressive tax. Regressive taxes are flat taxes. Gifts of up to $15,000 per person in 2018 are excluded from the tax. The first $5,000,000 of an
A customer has written 1 ABC Jan 50 Put @ $3. The contract is exercised. The tax consequence to the writer is a:
Correct Answer A. cost basis of $4,700
B. sale proceeds of $4,700
C. cost basis of $5,300
Incorrect Answer D. sale proceeds of $5,300
The best answer is A. If the writer of a put is exercised, he must buy the stock at the strike price. The premium received is a reduction of the cost of buying the stock. The writer of the put must buy 100 shares at $50 ($5,000), but he or she received $3
A customer buys 10M of $1,000 par corporate bonds in the secondary market. The purchase confirmation shows that the customer paid 90 + $150 of accrued interest. Six months later, the customer sells the bonds in the market at 91 + $50 of accrued interest.
The best answer is B.
The accrued interest on a bond has no bearing on the capital gain or loss that results from the liquidation of a position. Rather, the accrued interest is an adjustment to interest income paid or received for that tax year. These bon
A customer buys 200 shares of PDQ stock at $60 per share. The customer then sells 3 PDQ Call contracts for total premiums of $1,500. The call contracts expire unexercised. After expiration, the customer's cost basis in the PDQ shares is:
Incorrect Answer
The best answer is C. The expiration of the call contracts results in a short term capital gain to the writer of $1,500, taxable in the year of expiration. The cost basis of the stock position is unaffected at $60 per share, for a total cost basis for 200
Which type of real estate limited partnership offers a deferred depreciation benefit?
Correct Answer A. New Construction
B. Raw Land
Incorrect Answer C. Existing Housing
D. All of the above
The best answer is A. Raw land is not depreciable; only the building on the land is depreciable. Existing housing is immediately depreciable. New construction is only depreciable after the building is completed - during the building phase, no depreciation
Which of the following will increase the tax basis of a limited partnership interest?
I Cash contribution to the partnership
II Assumption of recourse debt by the partner
III Assumption of non-recourse financing for real estate programs only
IV Distributi
The best answer is D. The "basis" is the theoretical value of the investment in the partnership. The "basis" amount establishes the limit of tax deductions that may be taken by the partner - so the larger the basis, the better it is for the partner.
Cash
If an investor sells stock short, and covers the position at a profit more than 12 months later, the gain will be taxed as:
Correct Answer A. a short term capital gain
Incorrect Answer B. a long term capital gain
C. passive income
D. earned income
The best answer is A. When an individual sells stock short, a holding period is never established. Because of this, all gains and losses are always short term.
The amount of accretion to be reported for tax purposes on an original issue discount bond requires the use of all of the following EXCEPT:
A. purchase price
Correct Answer B. market value
Incorrect Answer C. redemption price
D. maturity
The best answer is B. Annual accretion of an original issue discount bond for tax purposes is based upon the difference between the issue price and redemption price, accreted over the number of years to maturity. The market value has no bearing on the ann
Which statements are TRUE regarding dividend and capital gain distributions made by mutual funds?
I Capital gains are only taxable in the year they are distributed if they are not reinvested in additional shares of the mutual fund
II Capital gains are tax
The best answer is D. Mutual fund capital gains and dividend distributions are taxable to the shareholder in the year they are distributed by the fund, whether or not the distributions are automatically reinvested in new fund shares.
Which of the following statements are TRUE regarding original issue municipal bonds?
I Municipal original issue discount bonds must be accreted
II Municipal original issue discount bonds may be accreted
III Municipal original issue premium bonds must be a
The best answer is A.
The discount on original issue discount municipal bonds must be accreted annually. It is reported annually as municipal interest income earned (non-taxable), and the cost basis of the bond is adjusted upwards by this amount. If the b
When performing a municipal bond tax swap, the investor is:
I selling existing bonds at a gain
II selling existing bonds at a loss
III using the proceeds from the sale to buy the same bonds back
IV using the proceeds from the sale to buy similar, but not
The best answer is D. When performing a municipal bond tax swap, the investor is selling existing bonds at a loss and using the proceeds to buy similar, but not identical bonds so that the loss deduction is allowed under the "wash sale rule".
Which statements are TRUE about stock cost basis reporting?
I Stock cost basis is reported on Form 1099-DIV
II Stock cost basis is reported on Form 1099-B
III If there are multiple purchases of the stock and no instructions are received from the customer,
The best answer is C. Cost basis reporting to the IRS is required on Form 1099-B. The Form includes the cost basis of the security, the sale proceeds, and whether the holding period is short term or long term. If there are multiple purchases of the stock
Which of the following are regressive taxes?
I Estate and Gift Tax
II Sales Tax
III Excise Tax
IV Income Tax
A. I and IV only
Correct Answer B. II and III only
Incorrect Answer C. I, II, III
D. I, II, III, IV
The best answer is B. Sales and excise tax rates are constant, regardless of the dollar amount involved, so they are regressive. Estate and gift tax rates increase with the size of the gift or estate, so they are progressive. Income tax rates increase wit