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Question;43. 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.;44. In 2009, 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;45. In 2009, 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 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.;46. 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.;47. 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;48. 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.;49. 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%. Computer his after-tax rate of return on the;bond.;A. 4%;B. 3.82%;C. 3.72%;D. 2.42%;50. 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 qualifying;dividend.;C. Some or all of the distribution may be ordinary income.;D. None of the above is false.;51. 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.;52. Sixteen years ago, Ms. Herbert purchased an annuity for;$96,000. Beginning in September 2011, 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 in 2011 is included in;taxable income?;A. $0;B. $5,120;C. $10,880;D. None of the above;53. 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. In 2011, 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.;54. 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. $734,950;C. $682,000;D. $471,250;55. Which of the following statements about annuity;contracts is true?;A. Annuity contracts provide a fixed income stream.;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.;56. 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.;57. 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.;58. 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.;59. 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;60. 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;61. In 2009, Mrs. Owens paid $50,000 for 3,000 shares of a;mutual fund and elected to reinvest dividends in;additional shares. In 2009 and 2010, she received Form 1099s;reporting the following.;If Mrs. Owens sells her 3,390 shares in 2011 for $22 per;share, compute her recognized gain.;A. $24,580;B. $19,780;C. $16,630;D. $0;62. In 2009, Mrs. Owens paid $50,000 for 3,000 shares of a;mutual fund and elected to reinvest dividends in;additional shares. In 2009 and 2010, she received Form 1099s;reporting the following.;If Mrs. Owens sells 1,000 shares in 2011 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

 

Paper#44677 | Written in 18-Jul-2015

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