customer executes various transactions during the year and realizes a $10,000 net capital loss. What amount can be written off against ordinary income?
[A]$-0-[B]$1,500[C]$3,000[D]$10,000
$3,000
Only $3,000 in net capital loss can be written off against ordinary income in any given tax year.
A person in the 28% tax bracket has a short-term capital gain of $1,000. The tax liability is?
[A]$150[B]$280[C]$400[D]$500
$280
$1,000gain
x .28 tax rate
$ 280 tax liability
(short term gains are taxed at the investor full tax rate)
Which of the following tax rules are true as applied to short sales?
Wash sale rules apply to short sales
Realized losses on short sales are allowed as tax losses.
Wash sales are permitted only once in a 90 day period
[A]I only[B]I and II only[C]II and II
Wash sale rules apply to short sales
Realized losses on short sales are allowed as tax losses.
The IRS 30 day wash sale rule disallows a tax loss where a security (or substantially similar security) is bought within 30 days of its sale at a loss. This rul
A person in the 28% tax bracket incurs a long term capital gain of $8,000 and a capital loss of $3,000. What is his tax liability?
[A]$750[B]$1,200[C]$1,400[D]$2,240
$750
$8,000gain
$3,000loss
$5,000taxable
*.15tax rate$
750tax liability
The primary purpose of depreciation is which of the following?
[A]Spread the cost of an asset over the recovery period of the asset.[B]Decrease the cash flow of a corporation.
[C]Increase taxes.
[D]Increase net income.
[A]Spread the cost of an asset over the recovery period of the asset
Depreciation allows a corporation to write off the cost of an asset over a period of time, often equal to the life of that asset.
Which of the following items would a corporation be allowed to use as deductions for federal tax purposes?
I. Dividends paid on Real Estate Investment Trusts owned by the corporation
II. Capital gains distributions paid by mutual funds owned by the corpor
III. Dividends received by the corporation from other corporations common stock owned by the corporation
IV. Dividends received by the corporation from other corporations preferred stock owned by the corporation
Under Federal tax law corporations that own
What are the tax consequences of the following transactions?
01-10-98 Buy 100 ABC @ 1011-10-98 Buy 100 ABC @ 410-29-98 Sell 100 ABC @ 6
[A]A $400 long-term loss
[B]A $400 short-term loss
[C]A $600 short-term loss
[D]No gain or loss
[D]No gain or loss
There is no gain or loss because of the 30-day Wash Sale Rule. The customer repurchased the shares which were sold at a loss within 30 days of establishing the loss.
The wash sale rule may apply when an investor sells:
[A]100 shares of ABC at a loss and simultaneously buys 100 shares of ABC non-convertible preferred.
[B]100 shares of DEF at a loss and 30 days later buys a call option with DEF as the underlying securit
[B]100 shares of DEF at a loss and 30 days later buys a call option with DEF as the underlying security.
Wash sale rules apply when the investor sells a position at a loss and then purchases the same position or a relative equivalent within 30 days. This
Under Federal Income Tax Law, which of the following is true concerning a "wash sale"?
[A]A tax deduction is disallowed for the loss on the sale.
[B]The gain is taxed at a minimum rate of 20%.
[C]A tax deduction is allowed for the loss on the sale.
[D]The
[A]A tax deduction is disallowed for the loss on the sale.
A loss will be disallowed if the same or similar security is purchased 30 days prior to or after the transaction which established the loss.
An investor has $20,000 of capital gains and $25,000 of capital losses in a particular tax year. What is the maximum that the investor can deduct on the current year's tax return?
[A]$3,000[B]$5,000[C]$20,000[D]$25,000
$ 3,000
Capital losses may first be used to offset capital gain. If a taxpayer has a net capital loss, the taxpayer may deduct up to $3,000 per year and any remaining loss may be carried forward to future tax years.
Which of the following would be classified as a Progressive Tax?
Income tax
Sales tax
Estate tax
Gasoline tax
Income tax
Estate tax
Income tax and Estate tax are progressive.
Sales tax and gasoline tax are regressive.
A regressive tax would put a greater tax burden on which of the following?
[A]Investors in a 38% or greater tax bracket.
[B]Self-employed persons.
[C]Those who could least afford it.
[D]Accredited investors.
[C]Those who could least afford it.
Regressive taxes put a greater tax burden on those persons who can least afford it.
The Intra Corporation earned $3 million plus received $200,000 in preferred dividends. The Corporation is in the 30% tax bracket. Taxes on its entire amount of taxable income would be:
[A]$900,000[B]$918,000[C]$930,000[D]$960,000
$930,000
$200,000 . dividend income
x .50 . taxable portion (50% exempt)
$ 100,000 taxable portion
$3,000,000+ 100,000
=$3,100,000
*.3
--------------------------
$ 930,000 tax liability
A security purchased on June 30th of one year would be considered to have a long-term holding if the security is sold on:
[A]June 30th or later of the following year
[B]July 1st or later of the following year
[C]any business day following 6 months from th
[B]July 1st or later of the following year
A long-term holding period is 12 months and one day or longer from the date the securities were acquired.
Under current tax law, a person in the 28% tax bracket who realizes a net long-term capital gain will pay tax at which of the following tax rates on the gain?
[A]20%[B]15%[C]28%[D]50
15%
The majority of taxpayers will pay only 15% on long-term capital gains. Only the top tax bracket is subject to the higher rate of 20%.
A customer executes various transactions during the year and realizes a $10,000 net capital loss. What amount can be written off against ordinary income?
[A]$-0-[B]$1,500[C]$3,000[D]$10,000
$ 3,000
Only $3,000 in net capital loss can be written off against ordinary income in any given tax year.
What percentage of dividends received by ABC corporation from XYZ corporation stock is taxed for federal income tax purposes?
[A]0%[B]30%[C]50%[D]70%
50%
Domestic corporations may exclude from taxable income 50% of dividends received from other domestic corporations, therefore, 50% of the dividend income is subject to tax at the corporation's marginal tax rate.
The primary purpose of depreciation is which of the following?
[A]Spread the cost of an asset over the recovery period of the asset.[B]Decrease the cash flow of a corporation.
[C]Increase taxes.
[D]Increase net income.
[A]Spread the cost of an asset over the recovery period of the asset.
Depreciation allows a corporation to write off the cost of an asset over a period of time, often equal to the life of that asset.
A customer has purchased $30,000 worth of ABC corporation over a period of time. Which of the following is true about his subsequent sale of $10,000 of ABC stock?
[A]His capital gain is $10,000.
[B]The IRS requires that LIFO be used to identify the shares
[D]The investor is allowed to specify which shares are being sold to minimize his capital gain.
For tax purposes the investor may indicate which shares are being sold - the most recently purchased - for example.
All of the following are methods of Depreciation EXCEPT:
[A]Double Declining Balance
[B]Straight Line
[C]Amortization
[D]Modified Accelerated Cost Recovery System (MACRS)
[C]Amortization
Amortization reduces the cost basis of bonds purchased at a premium and is not considered to be "depreciated
Regulations apply to certain securities with regards to the Alternative Minimum Tax (AMT), and some are considered tax-preferenced items, while other securities would not be subject to AMT. With regards to the following issues of municipal securities, whi
[C]General obligation bonds issued by a school district
Bonds issued for "Private" purposes are items which could be used as preferenced items when computing Alternative Minimum Tax, but bonds issued for "public" purposes such as schools would not fall in
During the year, a customer has realized $10,000 in capital losses and $3,000 in capital gains. Which of the following is correct?
[A]The customer can offset $7,000 in ordinary income with the net capital loss.
[B]$3,500 may be deducted from ordinary inco
[C]$3,000 is deductible; $4,000 is carried forward as a capital loss carryforward.
$ 7,000 Total in losses
To shelter income, a customer could invest in which of the following?
A variable annuity
A Keogh Plan
A municipal bond
An IRA
[A]I and II[B]III and IV[C]I, III and IV[D]All
A variable annuity
A Keogh Plan
A municipal bond
An IRA
A person in the 28% tax bracket incurs a long term capital gain of $8,000 and a capital loss of $3,000. What is his tax liability?
[A]$750[B]$1,200[C]$1,400[D]$2,240
$ 750
$5,000 Is taxable
*15%
---------------------
$750
Under Federal Tax Law, an investor would have to pay the alternative minimum tax
[A]only if an investor purchased an oil and gas program.
[B]only if the investor's capital gains exceeded 15% of total income.[C]if the alternative minimum tax due exceeded t
if the alternative minimum tax due exceeded the investor's regular income tax liability.
An investor must pay the alternative minimum tax if the amount due exceeded the investor's regular income tax liability.
Mr. Jones regularly buys and sells corporate debt securities in his account. In the process of buying 1 XYZ Corp bond at a market price of 98, he pays accrued interest of $250. Later on, he sells the 1 XYZ Corp bond at a market price of 99 and receives $1
[B]He will have a capital gain of $10.
Capital gains does not include accrued interest
In this case, the question is specifying capital gains and losses. Here, the customer's accrued interest on the bond will be classified as ordinary income. Since we're
Assume a customer's Alternative Minimum Tax is greater than his regular tax liability. In order to compute his federal tax liability, the customer must do which of the following?
[A]Pay his regular tax liability.
[B]Pay his regular tax liability and his A
[C]Add to his regular tax, the excess of the Alternative Minimum Tax over his regular tax.
The alternative Minimum Tax is the amount the customer must pay. This is equal to his regular tax plus the excess of the AMT over his regular tax.
The bonds of the Xlant Corporation have a higher yield than that Corporation's preferred stock. The Inwise Corporation decides to invest in Xlant's preferred stock. The reason for this decision is probably because
[A]dividends on preferred stock receive t
[A]dividends on preferred stock receive the 50% tax exclusion.
Corporations only pay taxes on 50% of the dividends received from investment in other companies' stock. Even though the preferred stock may not have as high a yield as the bonds, the investing
Several years ago and just prior to retirement, Mr. Smith purchased 500 shares of ABC. At the time of purchase, ABC was trading at $45 per share. The price increased over the past few years and was at $60 per share when the RR for Mr. Smith's account lear
[C]Jane's cost basis would be the price at the time the shares were transferred, $60 per share.
When shares of stock are inherited through a will, the cost basis to the beneficiary is the price at which the shares were transferred from the deceased. In th
One of your clients is a high-level executive who is in the highest tax bracket. The client is NOT currently subject to AMT (the alternative minimum tax). If this investor is looking to maximize the amount of income that they receive, which of the followi
[C]You should recommend that the client buy tax-free municipal bonds that are subject to AMT that are yielding 7.0%.
In this case, the client is NOT currently subject to AMT. With the information that has been provided, the client wants the highest yield
The Alternative Minimum Tax (AMT) may be applied to shareholders of a mutual fund that has which of the following securities contained within?
[A]U.S. Treasury Bills
[B]Convertible bonds
[C]Municipal bonds issued for private industry purposes
[D]Investmen
[C]Municipal bonds issued for private industry purposes
For individuals, the AMT is computed by adding tax preference items to taxable income. Among those items is interest earned on private activity municipal bonds.
For tax purposes, ownership of most securities is determined from the:
[A]date of receipt of the certificates
[B]settlement date
[C]trade date
[D]record date
[C]trade date
Ownership for most securities transactions is determined from trade date.
Which of the following is FALSE according to Federal Gift Tax Laws?
[A]Up to $15,000 (tax year 2020) may be gifted to each individual recipient without tax consequence to the giftor.
[B]Tax consequences on gifts are paid by the giftor.
[C]When a wife give
[C]When a wife gives a gift of money to her husband, both of whom are U.S. citizens, it is a taxable event.
A gift between spouses is NOT a taxable event. All of the other statements are true regarding current tax law.
All of the following are TRUE about federal tax rules EXCEPT:
[A]A gift between spouses is taxable.
[B]The donor is liable for the gift tax.
[C]Long-term capital gains is taxed lower than than short-term capital gains.
[D]A donor may give up to $15,000 pe
[A]A gift between spouses is taxable.
Inter-spousal gifts are exempt from the federal gift tax. The federal gift tax annual exclusion has been set at $15,000.
An investor owns 300 shares of ABC stock acquired as follows:
Year 1 Purchased 100 shares at $23 per shareYear 2 Purchased 100 shares at $29 per shareYear 3 Purchased 100 shares at $20 per shareYear 4 No activity
The investor decides to sell 100 shares in
[D]Identifying the shares that the customer intends to sell
Using identified shares, the taxpayer can identify the 100 shares bought in Year 2 at $29 per share as the shares the taxpayer sold. Therefore, the capital gain ($35 - $29 = $6 per share) is mini
In order to avoid coverage by Wash Sale rules, a customer who has sold a stock and wishes to report the loss in the year of the sale must wait how long before buying that same stock again in their account?
[A]The customer must wait until the 91st day foll
[C]The customer must wait until the 31st day following the sale.
The wash sale rules dictate that in order to be able to report a loss in a given year on the sale of a long stock position, the customer must not have purchased substantially the same stock
All of the following are advantages of Accelerated Cost Recovery System EXCEPT:
[A]100% of the depreciable basis can be recovered.
[B]Salvage value is not considered.
[C]Used property is allowed a full write-off.
[D]It uses component depreciation.
[D]It uses component depreciation.
ACRS generally does not allow Component Depreciation but instead requires Composite Depreciation. Component Depreciation depreciates assets based on the life of the asset -eg; plumbing 20 years; building 50 years. Wherea
An investor sells a security at a loss and buys substantially the same security within a 30 day period. For federal income tax purposes, the loss is:
[A]allowed if the security was held for more than one year
[B]allowed regardless of how long the security
[D]disallowed as a loss but can be carried over and added to the cost basis of the new position
Selling a security at a loss and buying the same security back within 30 days of the sale is considered to be a "wash sale." For tax purposes, wash sales do no
When a corporation is investing its funds, which of the following types of securities provides the best tax incentives for the corporation?
[A]Convertible fixed income debt securities
[B]Treasury securities
[C]Corporate debt securities
[D]Corporate prefer
[D]Corporate preferred stock
When a corporation invests in the equity securities of other corporations, the dividends from those securities are 50% excluded from taxable income. Therefore, only 50% is subject to income tax. Preferred stock provides the gr
One of your clients owns 500 shares of BCD stock and is concerned with tax consequences associated with their investments. BCD announces a 5% stock dividend on their common stock and your client will be receiving 25 additional shares. The client calls in
[A]The stock dividend is not a taxable event for this client at this time.
When a stock dividend is paid, the cost basis of the customer's shares is adjusted, but there are no tax consequences in the year that the stock dividend is received. Were this a c
A client sells a stock short in their portfolio. The client plans to cover the short sale but prior to covering, calls to ask the RR how to achieve long-term status for capital gains purposes on the short sale. How should the RR respond?
[A]The RR should
[A]The RR should inform the client that short sales do not qualify for long-term capital gains treatment, regardless of how long the position was short in the client's account.
Regardless of the time period during which the stock was sold short by the cus
If a long call option is exercised by the holder, the holding period on the acquired securities begins:
[A]on the date the call is exercised
[B]the day after the option is exercised
[C]the day the call option was acquired
[D]the day after the call option
[B]the day after the option is exercised
The holding period on stock purchased by exercising a call begins on the day after the call is exercised.
Which of the following may a U.S. investor use to offset taxes paid on dividend income earned from owning foreign stocks?
[A]Tax-Exempt Status
[B]Foreign Tax Credit
[C]Tax Lien
[D]Residual Value
[B]Foreign Tax Credit
Foreign companies and governments generally withhold a percentage of U.S. investors' dividends and interest received from foreign securities to cover foreign taxes, but they do not withhold capital gains. The customer can use the amo
Several years ago and just prior to retirement, Mr. Smith purchased 500 shares of ABC. At the time of purchase, ABC was trading at $45 per share. The price increased over the past few years and was at $60 per share when the RR for Mr. Smith's account lear
[C]Jane's cost basis would be the price at the time the shares were transferred, $60 per share.
When shares of stock are inherited through a will, the cost basis to the beneficiary is the price at which the shares were transferred from the deceased. In th
A client sells a stock from their account for a loss. Within 30 days, the customer buys the same stock back into their account. The broker/dealer informs the client that this is considered a wash sale. How is this scenario treated for tax purposes?
[A]The
[B]The new position's cost basis will be adjusted based on the amount of the loss.
Once it has been ruled that a wash sale has occurred, the customer will no longer be able to report a loss for purposes of that initial sale. The loss incurred in the first