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Question;1. The tax consequences of a business activity are generally;the same as the tax consequences of an;investment activity.;True False;2. The income generated from an investment activity is;primarily attributable to invested capital rather than;the owner's personal involvement in the activity.;True False;3. Electing to reinvest dividends in additional shares of;stock does not defer income recognition.;True False;4. The interest earned on a state or local government bond;is exempt from federal taxation.;True False;5. The interest earned on investments in U.S. debt;obligations is subject to state taxation.;True False;6. Qualified dividend income earned by an individual taxpayer;is taxed at a maximum rate of 15%.;True False;7. Only accrual basis individuals are required to accrue;original issue discount on a bond as annual interest;income.;True False;8. Cash basis individuals must accrue market discount on a;bond as annual interest income over the life of;the bond.;True False;9. The cash surrender value of a life insurance policy is;taxable to the policy beneficiary upon the death of;the insured individual.;True False;10. 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 of income as a result of the;cancellation.;True False;11. 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;12. 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;13. Brokerage fees paid when stock is purchased are added to;the basis of the stock.;True False;14. 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;15. On April 19, 2011, Sandy learned that her stock;investment had become worthless. The stock is deemed;to be worthless on December 31, 2011.;True False;16. 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;17. The tax rate on capital gains is determined solely by;reference to the capital asset's holding period.;True False;18. Individual taxpayers may carry nondeductible capital;losses forward indefinitely.;True False;19. An individual with a 15% rate marginal tax rate on;ordinary income will pay no tax on long-term capital;gains.;True False;20. Unrecaptured Section 1250 gain is taxed at a maximum;rate of 28%.;True False;21. Individual taxpayers are not allowed to deduct capital;losses in excess of capital gains.;True False;22. 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.;True False;23. 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.;True False;24. 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.;True False;25. Gain on the sale of qualified small business stock is;taxed at a maximum rate of 15%.;True False


Paper#44676 | Written in 18-Jul-2015

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