Principles of Taxation

Business

Quiz 16 :
Investment and Personal Financial Planning

Quiz 16 :
Investment and Personal Financial Planning

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The tax consequences of a business activity are generally the same as the tax consequences of an investment activity.
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True False
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Answer:

False

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

True

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Electing to reinvest dividends in additional shares of stock does not defer income recognition.
Free
True False
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Answer:

True

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The interest earned on a state or local government bond is exempt from federal taxation.
True False
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The interest earned on investments in U.S.debt obligations is subject to state taxation.
True False
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Qualified dividend income earned by individual taxpayers is taxed at a maximum income tax rate of 20%.
True False
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Only accrual basis individuals are required to accrue original issue discount on a bond as annual interest income.
True False
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Cash basis individuals must accrue market discount on a bond as annual interest income over the life of the bond.
True False
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The cash surrender value of a life insurance policy is taxable to the policy beneficiary upon the death of the insured individual.
True False
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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.
True False
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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.
True False
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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.
True False
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Brokerage fees paid when stock is purchased are added to the basis of the stock.
True False
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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.
True False
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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.
True False
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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.
True False
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The tax rate on capital gains is determined solely by reference to the capital asset's holding period.
True False
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Individual taxpayers may carry nondeductible capital losses forward indefinitely up to the $3,000 maximum loss per year.
True False
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An individual with a 10% rate marginal tax rate on ordinary income will pay no tax on long-term capital gains.
True False
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Unrecaptured Section 1250 gain is taxed at a maximum rate of 28%.
True False
Answer:
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