chapter 7

If Jim invested $100,000 in an annual-dividend paying stock today with a 7 percent return, what investment time period will give Jim the greatest after-tax return?

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

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

What rate should be used when calculating the after-tax future value of investments with a constant rate of return that is taxed annually?

If Tom invests $60,000 in a taxable corporate bond that provides a 5 percent before-tax return, how much will Tom's investment be worth in either 8 or 20 years from now when the bond matures? Assume Tom's marginal tax rate is 35 percent.

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

The amount of interest income a taxpayer recognizes when he redeems a U.S. savings bond is:

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

When a bond is purchased in the secondary bond market at a discount, the amount of discount treated as interest income when the bond is sold prior to maturity is the:

If Adam invested $25,000 in a stock paying annual dividends equal to 5% of his investment, what would the value of his investment be 10 years from now assuming that he reinvested his after-tax dividends each year? Assume Adam's marginal ordinary tax rate is 15%.

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

Long-term capital gains can be taxed at a maximum rate of:

Cory recently sold his qualified small business stock (acquired in 2014) for $90,000 after holding it for ten years. His basis in the stock is $40,000. Assuming his marginal tax rate is 35 percent, how much tax will he owe on the sale?

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?

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:

When the wash sale rules apply, the realized loss is:

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

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:

Ms. Fresh bought 1,000 shares of Ibis Corporation stock for $5,000 on January 15, 2012. On December 31, 2014 she sold all 1,000 shares of her Ibis stock for $4,500. Based on a hot tip from her friend, she bought 1,000 shares of Ibis stock on January 23, 2015 for $3,000. What is Ms. Fresh's recognized loss on her 2014 sale and what is her basis in her 1,000 shares purchased in 2015?

Kevin bought 200 shares of Intel stock on January 1, 2014 for $50 per share with a brokerage fee of $100. Then, Kevin sells all 200 shares for $75 per share on December 12, 2014. The brokerage fee on the sale was $150. What is the amount of the gain/loss Kevin must report on his 2014 tax return?

If an individual taxpayer's marginal tax rate is 35 percent and he holds the following assets for more than one year, which gain will be taxed at the highest rate at the time of sale?

The longer the holding period on growth stocks, ____________ the after-tax rate of return.

Tom, from Nebraska, and Jill, from Missouri, recently got married. To earn a decent return on all their wedding gifts, they decide to invest in some municipal bonds issued by the state of Missouri. Assuming they both qualify as Missouri residents, the bond interest Tom and Jill earn will be subject to the following taxes:

Which of the following portfolio investments is incorrectly characterized (Investment - Income Type - Timing of Taxation - Tax Rate)?

When 529 plan distributions are not used for qualified higher education expenses, these distributions are subject to an additional penalty of:

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?

What explicit tax rate would keep Jason indifferent between purchasing a municipal bond with a 3.0 percent return and a taxable bond with a 4.5 percent before-tax return? (Round your answer to the nearest percent)

Jim (life expectancy is 20 years) decides to purchase a life insurance policy for $75,000 that promises a 9 percent annual return. Jim decides to cash in the policy after five years while still living. Assuming Jim's marginal tax rate is 35 percent, what are his after-tax proceeds? (Round all interim calculations to the nearest whole number)

Maximum yearly contributions per beneficiary to Coverdell Savings Accounts are limited to:

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?

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

Life insurance policies have nontax factors that limit their desirability as an investment vehicle. Some of these factors include:

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

Bill would like some tax benefits for his investment expenses incurred this year. His AGI is $190,000. Currently, his expenses consist of: (1) $1,000 investment advice fees, (2) $1,500 unreimbursed employee business expenses (a miscellaneous itemized deduction), and (3) $600 tax return preparation fees. How much more, if any, must Bill spend for investment expenses this year before he receives any tax benefit?

When calculating net investment income, gross investment income includes:

Unused investment interest expense:

Brandon and Jane Forte file a joint tax return and decide to itemize their deductions. The Forte's income for the year consists of $120,000 in salary, $1,000 interest income, $1,500 nonqualifying dividends, and $1,000 long-term capital gains. The Forte's expenses for the year consist of $3,000 investment interest expense and $900 tax preparation fees. Assuming that the Forte's marginal tax rate is 30%, what is the amount of investment interest expense deduction for the year?

Investment expenses treated as miscellaneous itemized deductions do not include:

Investment interest expense does not include:

Assume that Joe has a marginal tax rate of 35 percent and decides to make the election to include long-term capital gains and qualified dividends as investment income. What rate must Joe use when calculating the tax on these two items?

Doug and Sue Click file a joint tax return and decide to itemize their deductions. The Click's income for the year consists of $90,000 in salary, $2,000 interest income, $800 long-term capital loss. The Click's expenses for the year consist of $1,500 investment interest expense. Assuming that the Click's marginal tax rate is 35%, what is the amount of their investment interest expense deduction for the year?

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 consists of $800 investment advice fees, $700 unreimbursed employee business expenses (a miscellaneous itemized deduction), and $250 tax return preparation fees. What is Bob's actual deduction for miscellaneous itemized deductions?

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?

What is the correct order of the loss limitation rules?

Sue invested $5,000 in the ABC Limited Partnership and received a 10 percent interest in the partnership. The partnership had $20,000 of qualified nonrecourse debt and $20,000 of debt she is not responsible to repay because she is a limited partner. Sue is allocated a 10 percent share of both types of debt resulting in a tax basis of $9,000 and an at risk amount of $7,000. During the year, ABC LP generated a ($90,000) loss. How much of Sue's loss is disallowed due to her tax basis or at-risk amount?

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

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

Michelle is an active participant in the rental condominium property she owns. During the year, the property generates a ($15,000) loss; however, Michelle has sufficient tax basis and at-risk amounts to absorb the loss. If Michelle has $115,000 of salary, $10,000 of long-term capital gains, $3,000 of dividends, and no additional sources of income or deductions, how much loss can Michelle deduct?

The rental real estate exception favors:

On the sale of a passive activity, any suspended losses cannot be used to offset income from: