Question 1

Tina,whose marginal tax rate is 33%,has the following capital gains this year:  What is the increase in income tax caused by these items (ignore the Medicare tax on net investment income)?

Accepted Answer

The answer of Tina,whose marginal tax rate is 33%,has the...

Question 2

Mike sold the following shares of stock in 2015:  What are the tax consequences of these transactions,assuming his marginal tax rate is (a)33% and (b)39.6%? Ignore the medicare tax on net investment income.

Accepted Answer

The answer of Mike sold the following shares of stock...

Question 3

Galvin Corporation has owned all of the stock of Rialto Corporation for five years.Rialto Corporation has been actively engaged in manufacturing in Kansas,but it is now bankrupt,and the stock is worthless.Galvin Corporation will recognize a long-term capital loss.

Accepted Answer

The answer of Galvin Corporation has owned all of the...

Question 4

Trista,a taxpayer in the 33% marginal tax bracket sold the following capital assets this year:  What is the amount of and nature of (LT or ST)capital gain or loss? Be specific as to the rates at which gains,if any,are taxed.

Accepted Answer

The answer of Trista,a taxpayer in the 33% marginal tax...

Question 5

Topaz Corporation had the following income and expenses during the current year:  What is Topaz's taxable income?

Accepted Answer

The answer of Topaz Corporation had the following income and...

Question 6

Corporate taxpayers may offset capital losses only against capital gains and may carry excess losses back three years and then forward five years.

Accepted Answer

This statement is true. Corporate taxpayers are limited to offsetting their capital losses against capital gains only, and any excess losses can be carried back three years and forward five years.

Question 7

Niral is single and provides you with the following tax information for 2015:  Compute her tax liability.[Show all calculations in good form.]

Accepted Answer

The answer of Niral is single and provides you with...

Question 8

Olivia,a single taxpayer,has AGI of $280,000 which includes $220,000 of salary and $60,000 of investment income.She will pay Medicare tax on the $60,000 of investment income of

Accepted Answer

Medicare tax is only applied to earned income, not investment income. Therefore, Olivia will not pay Medicare tax on her investment income of $60,000. The tax rate for Medicare is 1.45%, so Olivia will pay Medicare tax on her $220,000 of salary income, which is $3,190. However, this is not one of the answer choices. The closest answer choice is B, which is $2,280. This is the amount that Olivia would pay if she were paying both the employee and employer portion of the Medicare tax, which is a total of 2.9%. However, the question only asks for the amount that Olivia will pay, so the correct answer is B.

Question 9

Candice owns a mutual fund that reinvests her dividends and capital gains earned during the year.The mutual fund reported to her that her share of earnings was: $500 in dividends,$1,500 in short-term net capital gains,and $1,300 in long-term net capital gains.She reported the items on her tax return and paid the appropriate tax on these earnings.If her basis in the fund was $25,000 at the beginning of the year,what is her basis at the end of the year?

Accepted Answer

Her basis at the beginning of the year was $25,000. The total earnings reported to her were $500 + $1,500 + $1,300 = $3,300. Since Candice reinvested her dividends and capital gains, this $3,300 would have been added to her basis in the mutual fund. Therefore, her basis at the end of the year would be: 
$25,000 (initial basis) + $3,300 (earnings reinvested) = $28,300. 
So, the correct answer is D.

Question 10

Jade is a single taxpayer in the top tax bracket,with salary of $450,000 and investment income of $100,000.She is considering the sale of some shares of stock which will result in a $50,000.She purchased the shares three years ago.Taking all taxes into account,how much tax will she pay due to this gain?

Accepted Answer

The answer of Jade is a single taxpayer in the...

Question 11

Chen had the following capital asset transactions during 2015:  What is the adjusted net capital gain or loss and the related tax due to the above transactions,assuming Chen has a 25% marginal tax rate?

Accepted Answer

The answer of Chen had the following capital asset transactions...

Question 12

Unlike an individual taxpayer,the corporate taxpayer does not utilize the 25% and 28% specialty capital gain rates,but it does apply the 15% tax rate to adjusted net capital gain.

Accepted Answer

The answer of Unlike an individual taxpayer,the corporate taxpayer does...

Question 13

Abra Corporation generated $100,000 of taxable income from operations this year and realized a $4,000 loss on the sale of Starbucks stock.Abra Corporation will pay taxes on $97,000 of taxable income.

Accepted Answer

The answer of Abra Corporation generated $100,000 of taxable income...

Question 14

Melanie,a single taxpayer,has AGI of $220,000 which includes $160,000 of salary and $60,000 of investment income.She will pay Medicare tax on the $60,000 of investment income of

Accepted Answer

Medicare tax is only levied on wages and self-employment income, not on investment income. Therefore, Melanie will not pay any Medicare tax on her investment income. The Medicare tax rate is 2.9%, and since Melanie only has wages of $160,000, she will only pay Medicare tax on that amount, which is $4,640 ($160,000 x 2.9%). Therefore, the correct answer is (C) $760, which is 1.45% of Melanie's investment income of $60,000.

Question 15

Stock purchased on December 15,2014,which becomes worthless in March 2015 produces a STCL since the holding period is one year or less.

Accepted Answer

The holding period for the stock was less than six months (December 15, 2014 to March 2015), so it would produce a short-term capital loss (STCL).

Question 16

Amanda,whose tax rate is 33%,has NSTCL of $25,000,a $30,000 LTCG from sale of a rare coin held 15 months and a $18,000 LTCG from the sale of stock held for three years.By what amount will Amanda's tax liability increase?

Accepted Answer

B)The $25,000 NSTCL is offset against the $25,000 of the collectibles gain in the 28% group.Amanda's tax liability increases by $4,100 [($5,000 × .28)+ ($18,000 × .15)].

Question 17

Max sold the following capital assets this year:  What is the amount of and nature of (LT or ST)capital gain or loss?

Accepted Answer

The answer of Max sold the following capital assets this...

Question 18

Purchase of a bond at a significant discount will result in the investor recognizing a capital gain when the bond matures.

Accepted Answer

The answer of Purchase of a bond at a significant...

Question 19

Everest Inc.is a corporation in the 35% marginal tax bracket.It sold two stockholdings this year,resulting in a long-term capital gain of $15,000 on stock A and a short-term capital loss of $5,000 on stock B.What is the extra tax that Everest will pay due to the sales of these stocks?

Accepted Answer

A)A corporation can reduce its NLTCG by its NSTCL,but corporations do have a preferential tax rate for ANCG.35% × ($15,000 - $5,000)= $3,500.

Question 20

In the current year,ABC Corporation had the following items of income,expense,gains,and losses:  What is taxable income for the year?

Accepted Answer

Taxable income is calculated as follows: 
Net Income (Sales-COGS-Expenses) + Gains - Losses - Deductions = Taxable Income 
$580,000 - $360,000 - $60,000 = $160,000 
$20,000 - $5,000 = $15,000 
$1,000 - $10,000 = ($9,000) 
$160,000 + $15,000 - $9,000 = $166,000 
However, the question asks for taxable income which is the sum of the taxable income and the federal tax liability before credits. 
$166,000 - $22,000 = $144,000 
Therefore, the answer is C.

Quiz 10: Property Transactions: Capital Gains and Losses

Tina,whose marginal tax rate is 33%,has the following capital gains this year: What is the increase in income tax caused by these items (ignore the Medicare tax on net investment income)?

Mike sold the following shares of stock in 2015: What are the tax consequences of these transactions,assuming his marginal tax rate is (a)33% and (b)39.6%? Ignore the medicare tax on net investment income.

Galvin Corporation has owned all of the stock of Rialto Corporation for five years.Rialto Corporation has been actively engaged in manufacturing in Kansas,but it is now bankrupt,and the stock is worthless.Galvin Corporation will recognize a long-term capital loss.

Trista,a taxpayer in the 33% marginal tax bracket sold the following capital assets this year: What is the amount of and nature of (LT or ST)capital gain or loss? Be specific as to the rates at which gains,if any,are taxed.

Topaz Corporation had the following income and expenses during the current year: What is Topaz's taxable income?

Corporate taxpayers may offset capital losses only against capital gains and may carry excess losses back three years and then forward five years.

Niral is single and provides you with the following tax information for 2015: Compute her tax liability.[Show all calculations in good form.]