Question 1

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 $1,800,000, and the transfer was Mr. Ames' first taxable gift.
b. FMV of the real estate was $7,250,000 and the transfer was Mr. Ames' first taxable gift.
c. FMV of the real estate was $2,300,000. Two years ago, Mr. Ames made his first taxable gift of marketable securities with a $3,920,000 FMV in excess of the annual exclusion.

Accepted Answer

The answer of Mr. Ames, an unmarried individual, made a...

Question 2

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 income and Medicare contribution tax if his taxable income before consideration of his capital transactions is $465,000, none of which is investment income.

Accepted Answer

The answer of Mr. Carp, a single taxpayer, recognized a...

Question 3

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.

Accepted Answer

The answer of Beverly earned a $75,000 salary and recognized...

Question 4

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.

Accepted Answer

The unearned income Medicare contribution tax applies to taxpayers with modified adjusted gross income over certain thresholds. For married couples filing jointly, the threshold is $250,000. Since the Bolt's AGI is $267,500, they are over the threshold by $17,500. The unearned income subject to the tax is the lesser of the couple's net investment income ($13,300) or the amount they are over the threshold ($17,500). Therefore, the amount subject to the tax is $13,300.

The tax rate for the unearned income Medicare contribution tax is 3.8%. Therefore, the tax amount is:

$13,300 x 3.8% = $505

So, the correct answer is C - $505.

Question 5

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.

Accepted Answer

The answer of Ms. Mollani owns stock in two S...

Question 6

Mr. McCann died this year. During his lifetime, he made taxable gifts significantly in excess of his lifetime exclusion. Mr. McCann's taxable estate was $21.9 million. Compute the estate tax on this estate.

Accepted Answer

The lifetime exclusion for 2021 is $11.7 million. Therefore, Mr. McCann's taxable estate, which is in excess of the exclusion, is $21.9 million - $11.7 million = $10.2 million.

The estate tax is computed as follows:

$1,772,800 + (($10,200,000 - $10,000,000) x 0.4)
= $1,772,800 + ($200,000 x 0.4)
= $1,772,800 + $80,000
= $1,852,800

Therefore, the estate tax on Mr. McCann's estate is $1,852,800 x 4 = $7,411,200. Because the estate tax must be rounded up to the nearest $10, the final estate tax is $7,411,210, which is closest to choice A, $8.760 million.

Question 7

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.

Accepted Answer

The answer of Mr. Lainson died this year on a...

Question 8

In 2011, 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 2011 and $2,960 in 2012. Mr. Yang sold the bond for $169,500 in 2013. 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?

Accepted Answer

The answer of In 2011, Mr. Yang paid $160,000 for...

Question 9

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.

Accepted Answer

The answer of Ms. Adair, a single individual, has $218,000...

Quiz 16: Investment and Personal Financial Planning

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.

Mr. McCann died this year. During his lifetime, he made taxable gifts significantly in excess of his lifetime exclusion. Mr. McCann's taxable estate was $21.9 million. Compute the estate tax on this estate.

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.