Quiz 16: Investment and Personal Financial Planning

The tax consequences of a business activity are generally the same as the tax consequences of an investment activity.

Income generated from an investment activity is primarily attributable to invested capital rather than the owner's personal involvement in the activity.

Electing to reinvest dividends in additional shares of stock does not defer income recognition.

The interest earned on a state or local government bond is exempt from federal taxation.

The interest earned on investments in U.S.debt obligations is subject to state taxation.

Qualified dividend income earned by individual taxpayers is taxed at a maximum income tax rate of 20%.

Only accrual basis individuals are required to accrue original issue discount on a bond as annual interest income.

Cash basis individuals must accrue market discount on a bond as annual interest income over the life of the bond.

The cash surrender value of a life insurance policy is taxable to the policy beneficiary upon the death of the insured individual.

Mr.Adams paid $53,500 in premiums on a whole life insurance policy.When he canceled the policy,he received its cash surrender value of $61,600.He must recognize $61,600 income as a result of the cancellation.

An owner of a life insurance policy that includes an investment element must recognize income equal to the annual increase in the policy's cash surrender value.

Ms.Martin received $80,000 from a $100,000 life insurance policy as an accelerated death benefit.None of the $80,000 is taxable to her.

Brokerage fees paid when stock is purchased are added to the basis of the stock.

If an investor sells some of the securities in a block but can't identify which ones were sold,she is presumed to have sold the securities with the latest acquisition date.

On April 19 of this year,Sandy learned that her stock investment had become worthless.The stock is deemed to be worthless on December 31 of this year.

Two years ago,James loaned $60,000 to his friend.The debt is now uncollectible.If the loan created a bona fide debt,James recognizes a short-term capital loss.

The tax rate on capital gains is determined solely by reference to the capital asset's holding period.

Individual taxpayers may carry nondeductible capital losses forward indefinitely up to the $3,000 maximum loss per year.

An individual with a 10% rate marginal tax rate on ordinary income will pay no tax on long-term capital gains.

Unrecaptured Section 1250 gain is taxed at a maximum rate of 28%.

Individual taxpayers are not allowed to deduct capital losses in excess of capital gains.

Up to $100,000 of loss recognized on the sale of Section 1244 stock by a married individual filing a joint return is characterized as ordinary loss.

Lana owns 50 shares of stock qualifying as Section 1244 stock.If she sells the stock to George,he can also treat the stock as Section 1244 stock.

Investors must hold qualified small business stock for more than five years in order to exclude a percentage of the gain on sale of such stock from gross income.

Gain on sale of qualified small business stock is taxed at a maximum rate of 15%.

Investment expenses are an itemized deduction.

Mr.Johnson borrowed money to buy Chicago municipal bonds.This year,he paid $2,000 interest on his loan and earned $3,500 interest income from the bonds.None of the interest expense is deductible.

An owner of undeveloped land held for investment must capitalize the property taxes paid on the land each year.

Investment interest expense is an above-the-line deduction.

Mr.Moyer owns residential rental property.This year,he received $7,000 revenue from the tenants and incurred $14,900 rental expenses.Mr.Moyer must include $7,000 in gross income and is allowed only $7,000 of above-the-line deductions for the expenses.

Ruth Darma is a shareholder who is not involved in the day-to-day activities of an S corporation.Her interest in the business is a passive activity.

Mr.Gray recognized a $60,000 loss on sale of his entire interest in a passive activity.He had a $52,000 passive activity loss carryforward from prior years.Mr.Gray can deduct the $52,000 loss in the year of sale.

Material participation in a business means that the individual is involved in the day-to-day operations on a regular,continuous,and substantial basis.

Revenue generated by the unearned income Medicare contribution tax is earmarked for the Medicare trust fund.

The unearned income Medicare contribution tax applies only to individual taxpayers whose marginal income tax rate is 37%.

An inter vivos transfer is a gratuitous transfer of property by an individual that occurs at death.

All gratuitous transfers of property are subject to gift tax.

This year,Mr.Chester gave $50,000 to an old friend who has no legal obligation to repay the money.The entire $50,000 is a taxable gift.

Gift tax is based on the donor's adjusted tax basis in the transferred property.

The kiddie tax limits the tax savings from a transfer of income-producing property to a minor child by taxing a portion of such income at the tax rates applying to estates and trusts.

The federal taxable estate of a decedent can exceed the value of the probate estate.

A beneficiary's basis of inherited property equals the decedent's adjusted basis immediately prior to death.

As a general tax planning rule,individuals should sell assets that have declined in value prior to death and keep appreciated property to transfer to their heirs at death.

Life insurance proceeds are includible in the taxable estate of the decedent if the decedent was the owner of the policy.

Mr.and Mrs.Holt made no taxable gifts during their lifetimes.Mrs.Holt died two years ago.Her estate tax return shows that she owed no estate tax and had an $800,000 unused lifetime exclusion.Mr.Hold died in 2019.The lifetime transfer tax exclusion available to his estate is $12.2 million.

Which of the following statements about investment property is false? A)The term securities includes corporate stock,certificates of deposit,notes,bonds,and other debt instruments. B)Interest and dividends are taxed at the same rate as long-term capital gain. C)Interest on private activity bonds issued by a state or local government is excluded from ordinary income. D)A mutual fund is a diversified portfolio of securities owned and managed by a regulated investment company.

Three years ago,Mr.Lewis paid $40,000 for a newly issued corporate bond with a $50,000 stated redemption value.This year,he sold the bond for $43,900.Through date of sale,Mr.Lewis recognized $940 of the original issue discount (OID)as accrued interest income.Compute his gain or loss on sale. A)$3,900 long-term capital gain B)$3,900 ordinary income C)$2,960 ordinary income D)$2,960 long-term capital gain

Two years ago,Mr.Young paid $40,000 to buy a publicly traded corporate bond through his broker.The bond's stated redemption value was $45,000.This year,Mr.Young sold the bond for $47,100.Compute and characterize his gain or loss on sale. A)$2,100 long-term capital gain. B)$7,100 ordinary income. C)$5,000 ordinary income and $2,100 long-term capital gain. D)$7,100 long-term capital gain.

Jane,a cash basis individual,purchased a publicly traded bond at a $6,000 market discount.Which of the following statements is true? A)Jane must accrue the market discount as interest income over the life of the bond. B)If Jane holds the bond to maturity,she will recognize a $6,000 capital gain. C)If Jane holds the bond to maturity,she will recognize $6,000 ordinary income. D)None of the statements is true.

At the beginning of the year,Calvin paid $5,000 for 60 shares of Eddington stock.In June,he received a $300 cash distribution with respect to the stock.His Form 1099-DIV reported that $170 was an ordinary dividend and $130 was nontaxable.Compute Calvin's tax basis in his 60 shares at year-end. A)$4,870 B)$4,700 C)$4,830 D)$5,000

At the beginning of the year,Ms.Faro paid $15,000 for 750 shares of Gravois stock.She instructed her broker to reinvest any dividends in additional Gravois shares.Her Form 1099-DIV reported that she earned $820 dividend income which purchased 39 additional shares.Which of the following statements is true? A)Ms.Faro recognizes no dividend income and has a $15,000 basis in her 789 shares. B)Ms.Faro recognizes no dividend income and has a $15,820 basis in her 789 shares. C)Ms.Faro recognizes $820 dividend income and has a $15,820 basis in her 789 shares. D)None of the above statements is true.

Mr.Gordon,a resident of Pennsylvania,paid $20,000 for a bond issued by Delaware.This year,he received $800 of interest on the bond.His marginal state tax rate is 7%,and under Pennsylvania law,interest on debt obligations issued by another state is taxable.Mr.Gordon can deduct state income tax on his federal return,and his marginal federal tax rate is 35%.Compute his after-tax rate of return on the bond. A)4% B)3)825% C)3)725% D)2)420%

Mr.and Mrs.Golding own 13,850 shares in PTJ mutual fund.This year,they received a $6,390 cash distribution from PTJ.Which of the following statements is false? A)Some or all of the distribution may be a capital gain distribution. B)Some or all of the distribution may be a qualified dividend. C)Some or all of the distribution may be ordinary income. D)None of the above is false.

Twenty years ago,Mr.Wallace purchased a $250,000 insurance policy on his own life and named his daughter as sole beneficiary.He has paid $14,250 total premiums to keep this policy in force.This year,he liquidates the policy for its $20,000 cash surrender value.Which of the following statements is true? A)Mr.Wallace recognizes $5,750 ordinary income on the liquidation. B)Mr.Wallace recognizes $20,000 ordinary income on the liquidation. C)Mr.Wallace recognizes no gain on the liquidation. D)Mr.Wallace recognizes $5,750 capital gain on the liquidation.

Sixteen years ago,Ms.Herbert purchased an annuity for $96,000.Beginning in September of this year,the annuity began paying Ms.Herbert $4,000 per month for the rest of her life.Based on her age,Ms.Herbert's expected return is $300,000.How much of the $16,000 that she received this year is included in taxable income? A)$0 B)$5,120 C)$10,880 D)None of the above

Emil Nelson paid $174,500 for an annuity that will pay him $1,300 per month for life.Based on Emil's age,his expected return is $405,813.This year,Emil received 12 payments totaling $15,600.How much of this total is taxable income? A)$0 B)$5,300 C)$6,708 D)None of the above.

Fifteen years ago,Lenny purchased an insurance policy on his own life.The policy provides a $3 million death benefit.Lenny has paid $682,000 of premiums,and the cash surrender value of the policy is $725,000.He plans to liquidate the policy to generate cash for his business.If Lenny's marginal tax rate is 35%,how much after-tax cash will the liquidation generate? A)$725,000 B)$709,950 C)$682,000 D)$471,250

Which of the following statements about annuity contracts is true? A)Annuity contracts provide a fixed income stream from the premiums paid. B)Payments received from an annuity contract are tax-exempt. C)Payments received from an annuity contract are fully taxable as ordinary income. D)Payments received from an annuity contract are fully taxable as capital gain.

Twenty years ago,Mrs.Cole purchased an insurance policy on her own life.Mrs.Cole died this year,and the policy paid the $300,000 death benefit to her son Jeffrey.During her life,Mrs.Cole paid total premiums of $71,200 on the policy.Which of the following statements is true? A)Jeffrey must recognize the $300,000 payment as ordinary income. B)Jeffrey must recognize $228,800 of the $300,000 payment as capital gain. C)Jeffrey can exclude the $300,000 payment from gross income. D)Jeffrey must recognize $228,800 of the $300,000 payment as ordinary income.

Mr.Ricardo exchanged 75 shares of Haslet common stock for 516 shares of Newland common stock pursuant to a reorganization of the two corporations.His basis in the Haslet stock was $49,200,and the fair market value of the Newland stock was $138,000.Which of the following statements about the exchange is true? A)Mr.Ricardo recognizes no gain and takes a $138,000 basis in the Newland stock. B)Mr.Ricardo recognizes an $88,800 gain and takes a $138,000 basis in the Newland stock. C)Mr.Ricardo recognizes no gain and takes a zero basis in the Newland stock. D)Mr.Ricardo recognizes no gain and takes a $49,200 basis in the Newland stock.

Mrs.Lindt exchanged 212 shares of Nipher common stock for 773 shares of Newland common stock.Her basis in the Nipher stock was $49,200,and the fair market value of the Newland stock was $138,000.Which of the following statements about the exchange is true? A)Mrs.Lindt's basis in her Newland stock is $138,000. B)Mrs.Lindt recognizes no gain on the exchange because she did not receive any cash. C)If the exchange is pursuant to a reorganization of Nipher and Newland,Mrs.Lindt recognizes no gain. D)None of the above is true.

Ten years ago,Elaine paid $10 per share for 2,000 shares of Lazlo common stock.This year,Elaine learned that Lazlo is in bankruptcy and can pay only 40% of its outstanding debt.What are the tax consequences to Elaine of Lazlo's bankruptcy? A)$20,000 long-term capital loss B)$12,000 long-term capital loss C)$20,000 ordinary loss D)No gain or loss

Six years ago,Mr.Ahmed loaned $10,000 to a neighbor in exchange for an interest-bearing debt obligation.This year,the neighbor informed Mr.Ahmed that he was defaulting on the debt.What are the tax consequences to Mr.Ahmed of this bad debt? A)$10,000 ordinary loss B)$10,000 short-term capital loss C)$10,000 long-term capital loss D)No loss recognized

In 2017,Mrs.Owens paid $50,000 for 3,000 shares of a mutual fund and elected to reinvest year-end dividends in additional shares.In 2017 and 2018,she received Form 1099s reporting the following. If Mrs.Owens sells her 3,390 shares in 2019 for $22 per share,compute her recognized gain. A)$24,580 B)$19,780 C)$16,630 D)$0

In 2017,Mrs.Owens paid $50,000 for 3,000 shares of a mutual fund and elected to reinvest year-end dividends in additional shares.In 2017 and 2018,she received Form 1099s reporting the following. If Mrs.Owens sells 1,000 of her 3,390 shares in 2019 for $22 per share and uses the average basis method,compute her recognized gain. A)$4,910 B)$5,333 C)$3,883 D)$0

Frederick Tims,a single individual,sold the following investment assets this year. If Frederick's preferential tax rate on adjusted capital gain is 15%,compute his tax attributable to the above sales. A)$5,250 B)$3,450 C)$2,850 D)$0

Tom Johnson,whose marginal tax rate on ordinary income is 22%,sold four investment assets resulting in the following capital gains and losses. How much of Tom's net capital gain is taxed at 15%? A)$42,800 B)$3,900 C)$2,700 D)$0

Mr.Quinn recognized a $900 net short-term capital gain and a $1,380 long-term capital gain this year.Which of the following statements is false? A)If Mr.Quinn's marginal tax rate on ordinary income is 12%,the total income tax on his capital gains is $108. B)If Mr.Quinn's marginal tax rate on ordinary income is 37%,the total income tax on his capital gains is $609. C)Only $1,380 of the capital gain is subject to a preferential tax rate. D)None of the above is false.

Kate recognized a $25,700 net long-term capital gain and a $33,000 net short-term capital loss this year.What is her current net income tax cost or savings from her capital transactions if her marginal rate on ordinary income is 32%? A)$0 B)$960 net tax savings C)$2,336 net tax savings D)$3,450 net tax cost

Ms.Beal recognized a $42,400 net long-term capital gain and a $33,000 net short-term capital loss this year.What is her current net income tax cost from her capital transactions if her marginal rate on ordinary income is 37%? A)$8,480 B)$4,240 C)$1,880 D)$6,360

Mr.and Mrs.Philips recognized the following capital gains and losses this year. Their AGI before consideration of these gains and losses was $140,000.Compute their AGI. A)$140,000 B)$131,000 C)$137,000 D)$143,000

Which of the following statements about the individual capital gains and losses is false? A)Gain on sale of Section 1231 depreciable real property is taxed at a 25% maximum rate. B)Short-term capital gains are taxed as ordinary income. C)Capital losses are deductible only against capital gains. D)Nondeductible capital losses are carried forward for deduction against future capital gains.

This year,Ms.Kwan recognized a $16,900 net long-term capital loss.Which of the following statements is true? A)Ms.Kwan has a $16,900 long-term capital loss carryforward into future years. B)Ms.Kwan has a $16,900 nondeductible loss that she can carry back three years and forward five years. C)Ms.Kwan can deduct $3,000 of the loss as an itemized deduction. D)None of the above is true.

In 2001,Mrs.Qualley,contributed $100,000 in exchange for 1,000 shares of Little Corporation,which is a qualified small business.This year,Mrs.Qualley's only capital transaction was the sale of the 1,000 shares of Little qualified small business stock for $180,000.If Mrs.Qualley's marginal rate on ordinary income is 37%,compute the income tax on her capital gain from this sale. A)$6,000 B)$11,200 C)$22,400 D)None of the above.

Mr.Forest,a single taxpayer,recognized a $252,000 loss on the sale of Section 1244 stock.What is the character of this loss? A)$50,000 ordinary and $202,000 capital B)$100,000 ordinary and $152,000 capital C)$252,000 capital D)$252,000 ordinary

In 1996,Mr.Exton,a single taxpayer,contributed $30,000 in exchange for 100 shares of Morton stock.In 2005,he paid $43,000 to another shareholder to purchase 100 more shares of Morton stock.Morton stock qualified as Section 1244 stock when it was issued.This year,Mr.Exton sold his 200 Morton shares for $250 per share.What is the amount and character of Mr.Exton's recognized loss? A)$23,000 ordinary loss B)$23,000 long-term capital loss C)$3,000 long-term capital gain and $30,000 ordinary loss D)$5,000 ordinary loss and $18,000 long-term capital loss.

Which of the following statements about Section 1244 stock is true? A)Some portion of a loss recognized on sale of Section 1244 stock is an ordinary deduction. B)Gain recognized on sale of Section 1244 stock is taxed at a 28% maximum rate. C)Individuals may purchase Section 1244 stock directly from the issuing corporation or from another shareholder. D)Corporations may issue an unlimited amount of Section 1244 stock.

Ms.Kerry,who itemized deductions on Schedule A,paid $15,000 interest on funds borrowed to acquire taxable bonds.Her AGI is $100,000,which includes $19,700 of interest income.How much of the interest expense can she deduct? A)$0 B)$19,040 C)$19,700 D)$15,000

Ms.Lopez paid $7,260 interest on a mortgage on undeveloped land that she holds as an investment.Ms.Lopez's AGI is $112,200,which includes $4,900 interest income from a certificate of deposit.Which of the following statements is true? A)Ms.Lopez can't deduct any of the $7,260 interest expense. B)Ms.Lopez can deduct $7,260 interest expense as an itemized deduction. C)Ms.Lopez can deduct $4,900 interest expense as an itemized deduction. D)Ms.Lopez can deduct $4,900 interest expense as an above-the-line deduction.

Which of the following statements about investment interest expense is true? A)The interest is allowed as an unlimited above-the-line deduction. B)The interest is allowed as an unlimited itemized deduction. C)Nondeductible interest carries forward into future years. D)The interest is deductible to the extent of the individual's AGI.

This year,Mr.and Mrs.Lebold paid $3,100 investment interest expense.They earned $4,750 investment income consisting of $1,900 interest and $2,850 qualified dividends.Which of the following statements is true? A)If the Lebolds elect to treat $1,200 of the qualified dividends as ordinary income not taxed at a preferential rate,they can deduct $3,100 investment interest expense. B)The Lebolds can deduct $3,100 investment interest expense only if they elect to treat the $4,750 qualified dividends as ordinary income not taxed at a preferential rate. C)The Lebolds can deduct $3,100 investment interest expense because their investment income exceeds $3,100. D)The Lebolds' deduction for investment interest expense is limited to $1,900.

Which of the following statements about an investment in undeveloped land is false? A)An investor can elect to capitalize interest expense on a mortgage incurred to purchase the undeveloped land. B)An investor can elect to capitalize property taxes on undeveloped land. C)An investment in undeveloped land is considered a liquid asset. D)Gain recognized on the sale of undeveloped land held as an investment is capital gain.

Ms.Regga,a physician,earned $375,000 from her medical practice and $20,500 interest and qualified dividends from her investment portfolio.She was allocated a $67,000 loss from a passive activity.Compute Ms.Regga's AGI. A)$328,500 B)$375,000 C)$395,500 D)None of the above

Mr.and Mrs.Sturm actively manage an office building that they purchased in January 1997.This year,the office building generated a $68,000 net loss.The couple's income items consisted of $72,300 salary and $14,000 interest and dividend income.How much of the rental loss is deductible this year? A)$25,000 B)$14,000 C)$0 D)$68,000

Lindsey owns and actively manages an apartment complex.This year,the complex generated a $40,300 net loss.If Lindsey's AGI before considering this loss is $118,200 and she owns no other passive activities,how much of the loss is deductible this year? A)$0 B)$9,100 C)$25,000 D)None of the above

Ms.Plant owns and actively manages an apartment complex.This year,the complex generated a $32,790 net loss.If Ms.Plant's AGI before considering this loss is $196,100 and she owns no other passive activities,how much of the loss is deductible this year? A)$0 B)$25,000 C)$32,790 D)None of the above

Mr.Vernon owns stock in two S corporations,Able Corporation and Benson Inc.This year,Mr.Vernon had the following income and loss items. If Vernon materially participates in Able's business but not in Benson's business,compute his AGI. A)$94,000 B)$74,000 C)$61,000 D)$41,000

Ms.Watts owns stock in two S corporations,MKP Corporation and Reynolds Inc.This year,Ms.Watts had the following income and loss items. If Ms.Watts materially participates in the business of both corporations,compute her AGI. A)$85,700 B)$113,700 C)$127,700 D)$155,700

Ms.Cowler owns stock in Serzo Inc.,an S corporation,and an interest in OTW Partnership.This year,Ms.Cowler had the following income and loss items. If Ms.Cowler's interests in Serzo and OTW are passive activities,compute her AGI. A)$68,000 B)$65,600 C)$85,000 D)$66,800

Mr.and Mrs.Nelson operate a small business as a sole proprietorship.This year,they have the following tax information. Compute Mr.and Mrs.Nelson's AGI. A)$50,900 B)$47,367 C)$50,147 D)None of the above

Last year,Mr.Margot purchased a limited interest in a business partnership,which is his only passive activity.Last year,he was allocated $14,900 of the partnership's ordinary business loss.This year,he was allocated $7,700 of the partnership's ordinary business income.Which of the following statements is false? A)Last year,Mr.Margot could not deduct any of his allocated partnership loss. B)This year,Mr.Margot can deduct $7,700 of last year's loss. C)Mr.Margot has a $7,200 passive activity loss carryforward into next year. D)None of the above statements is false.

Mr.and Mrs.Perry own stock in an S corporation,which is their only passive activity.They have an $8,200 passive activity loss carryforward into this year.This year,the Perrys are allocated a $1,600 share of corporate ordinary business income.In December of this year,they recognize a $3,500 long-term capital gain on the sale of their entire stock interest.How much of their loss carryforward can the Perrys deduct this year? A)$0 B)$5,100 C)$8,200 D)$1,600

Ms.Adair,a single individual,has $218,000 AGI,which includes $43,000 net investment income.Compute Ms.Adair's unearned income Medicare contribution tax. A)$0 B)$684 C)$817 D)$1,634

Mr.and Mrs.Bolt's joint return reports $267,500 AGI,which includes $13,300 net investment income.Compute the couple's unearned income Medicare contribution tax. A)$0 B)$665 C)$505 D)None of the above.

Ms.Poppe,a single taxpayer,made three gifts this year: $6,300 cash to her niece; $50,000 cash to Yale University; and 5,000 acres of land to her brother.Ms.Poppe's tax basis in the land was $400,000,and its fair market value of date of gift was $615,000.Compute Ms.Poppe's taxable gifts for the year. A)$385,000 B)$600,000 C)$621,300 D)$635,000

Mr.and Mrs.Gupta want to make cash gifts to each of their four children,the children's four spouses,and three grandchildren.Compute the total amount that the Guptas can transfer to their younger-generation family members without making a taxable gift for the year. A)$105,000 B)$210,000 C)$165,000 D)$330,000

Bess gave her grandson ten acres of undeveloped land.Bess' tax basis in the land was $35,000,and its fair market value at date of gift was $175,000.Two years after receiving the land,the grandson sold it for $200,000.Compute his recognized gain on sale. A)$0 B)$25,000 C)$165,000 D)$200,000

Mr.Lee made the following transfers this year.Which of the transfers are treated as gifts for federal tax purposes? A)Political contribution to the Democratic party B)Charitable contribution to the United Way C)Payment to a hospital for the medical expenses of his 39-year old son D)None of the above are treated as gifts.

Which of the following statements about the federal gift tax is false? A)The tax is imposed on the donor. B)The tax is based on the fair market value of the gifted property. C)An individual can give away $10 million (adjusted annually for inflation)every year without being subject to tax. D)The donor's basis in the gifted property carries over to become the donee's basis.

Which of the following are included in a decedent's taxable estate? A)Real property owned by the decedent and included in the probate estate. B)Proceeds of a life insurance policy on the decedent's life if the decedent owned the policy. C)An individual retirement account owned by the decedent and payable to the beneficiary named in the account. D)All of the above are included.

Which of the following does not reduce a decedent's taxable estate? A)The decedent's funeral expenses. B)Testamentary transfers to charitable organizations. C)Testamentary transfers to the decedent's spouse. D)Testamentary transfers to the decedent's children.

Mrs.Heyer inherited real estate from her mother.The mother's basis in the real estate was $382,000,and the fair market value at the date of the mother's death was $900,000.The mother's taxable estate was only $2.4 million,so the estate did not owe any federal estate tax.This year,Mrs.Heyer sold the real estate for $875,000.Compute her gain or loss recognized on sale. A)$0 B)$25,000 loss C)$493,000 gain D)$875,000 gain

Mr.Lainson died this year on a date when the total FMV of his property was $12 million and his debts totaled $450,000.His executor paid $15,000 of funeral expenses and $50,000 of accounting and legal fees to settle the estate.Mr.Lainson bequeathed $1 million to Villanova University,$200,000 to the Lutheran church,and $3.5 million to his surviving spouse.He left the remainder of the estate to his children.Compute Mr.Lainson's taxable estate. A)$10.285 million B)$10.735 million C)$7.985 million D)$6.785 million

Mr.McCann died this year.During his lifetime,he made taxable gifts significantly in excess of his lifetime transfer tax exclusion.Mr.McCann's taxable estate was $21.9 million.Compute the estate tax on this estate. A)$8.760 million B)$6.660 million C)$7.665 million D)The facts are insufficient to compute the estate tax.

In 2018,Mr.Yang paid $160,000 for a corporate bond with a $200,000 stated redemption value.Based on the bond's yield to maturity,amortization of the $40,000 discount was $3,024 in 2018 and $2,960 in 2019.Mr.Yang sold the bond for $169,500 in December 2019.What are his tax consequences in each year assuming that: a.He bought the newly issued bond from the corporation? b.He bought the bond in the public market through his broker?

Beverly earned a $75,000 salary and recognized a $7,200 loss on the sale of corporate stock this year.Compute her AGI in each of the following independent cases. a.Beverly had no other capital transactions this year. b.Beverly recognized a $13,500 capital gain on the sale of mutual fund shares. c.Beverly received a $9,500 capital gain distribution from a mutual fund and had a $3,200 capital loss carryforward from a previous year.

Mr.Carp,a single taxpayer,recognized a $44,000 long-term capital gain,a $12,000 short-term capital gain,and a $10,000 long-term capital loss.Compute Mr.Carp's 2019 income and Medicare contribution tax if his taxable income before consideration of his capital transactions is $465,000,none of which is investment income

Ms.Mollani owns stock in two S corporations,Aloha and Honu.This year,she had the following income and loss items: Compute Ms.Mollani's AGI under each of the following assumptions. a.She materially participates in Aloha's business but not in Honu's business. b.She materially participates in Honu's business but not in Aloha's business. c.She materially participates in both corporate businesses. d.She does not materially participate in either business.

In 2019,Mr.Ames,an unmarried individual,made a gift of real estate to his nephew.Compute the amount subject to the federal gift tax in each of the following situations. a.FMV of the real estate was $1.8 million,and the transfer was Mr.Ames' first taxable gift. b.FMV of the real estate was $17.25 million and the transfer was Mr.Ames' first taxable gift. c.FMV of the real estate was $12.3 million.Two years ago,Mr.Ames made his first taxable gift of marketable securities with a $3.92 million FMV in excess of the annual exclusion.