Stephany Fox
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Chapter 16 of ACT330 from CSU - Samelson

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Stephany Fox
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Chapter 16

Question 1 of 19

1

Reorganization is a non taxable exchange

Select one of the following:

  • True
  • False

Explanation

Question 2 of 19

1

Which of the following is false regarding annuities?

Select one of the following:

  • They are misleading, as they do not adjust for inflation

  • Premiums that you pay will equal your basis, so this part is recovered tax-free

  • Annuities are more beneficial for the buyers than for the insurance company

Explanation

Question 3 of 19

1

If you pay $400k in annuity premiums, but you'll live long enough to use 720k worth, how much of each dollar of annuity payment must you pay tax on?

Select one of the following:

  • 400/720

  • 720/400

Explanation

Question 4 of 19

1

Which of the following is not a characteristic of US EE savings bonds?

Select one of the following:

  • You pay for half

  • They accrue interest, on which you continually pay tax

  • All accrued interest is taxable at once

  • They stop paying interest after 30 years

Explanation

Question 5 of 19

1

Only net profit (rents minus operating and maintenance expenses) are included in the AGI of an owner of rental real estate.

Select one of the following:

  • True
  • False

Explanation

Question 6 of 19

1

Which of the following is true about rental real estate?

Select one or more of the following:

  • Rental real estate is a 1231 asset

  • Buildings are depreciated using MACRS with either 27.5 or 39 year recover periods

  • Depreciation allows owners to recover their investments in buildings

  • Rental real estate is never subject to Medicare contribution tax

Explanation

Question 7 of 19

1

A passive activity occurs when someone owns interest in a business and materially participates in the business, but they are not concerned about whether they make a profit.

Select one of the following:

  • True
  • False

Explanation

Question 8 of 19

1

Which of the following people would definitely be able to take a deduction of $5k for their passive activity loss?

Select one of the following:

  • Sandra had a regular business loss of $10k in the same year.

  • Billy had a regular business loss of $4k in that same year and no passive activity income

  • Lola had $5k of passive activity income

Explanation

Question 9 of 19

1

Hotels do not count as passive activity rental properties.

Select one of the following:

  • True
  • False

Explanation

Question 10 of 19

1

Whom of the following would be eligible for the special $25k passive activity loss deduction?

Select one or more of the following:

  • Nancy, who makes $150k/year

  • Zach, who makes $600k/year

Explanation

Question 11 of 19

1

Which of the following is an acceptable way to "cut one's losses" from a passive activity?

Select one or more of the following:

  • Get out the business and sell

  • Get involved in another passive activity, make a profit,and deduct the passive loss from your previous activity

Explanation

Question 12 of 19

1

Jill is single and has a net investment income of $125k and an AGI of $300k. How much will her income Medicare contribution tax be?

Select one of the following:

  • $4,651, or 3.8% of her net investment income

  • $11,400, or 3.8% of her AGI.

  • $3,800, or 3.8% of the excess of her AGI over the threshold of $200k

Explanation

Question 13 of 19

1

There are four basic kinds of transfer taxes.

Select one of the following:

  • True
  • False

Explanation

Question 14 of 19

1

A person has to be alive to transfer something subject to gift tax.

Select one of the following:

  • True
  • False

Explanation

Question 15 of 19

1

Which of the following gifts are not taxable?

Select one of the following:

  • Denny gives his convertible to his wife, friend Morton.

  • Felicia pays for her niece's chemotherapy treatments.

  • Wally gives loses his prize race horse in a bet.

Explanation

Question 16 of 19

1

Which of the following are eligible for a tax exclusion (given that none of the following people are related or married?

Select one or more of the following:

  • Tim gives Theresa a diamond ring worth $6k

  • Kimberly gives Kate a set of pots worth $300

  • Dana gives Lorraine a cooking lesson and pays for $30 of groceries

  • Lorraine gives Kyle plane tickets worth $20k so he can travel the world

Explanation

Question 17 of 19

1

You don't actually pay the tax on gift items until the lifetime transfer tax exclusion is reached. This is $5M, indexed each year for inflation. After this threshold is reached, the tax rate is 40%

Select one of the following:

  • True
  • False

Explanation

Question 18 of 19

1

Which of the following estates won't have to pay tax?

Select one or more of the following:

  • Betty leaves all her money to her son Tim

  • Ramona leaves all her money to her husband Levi

  • Janelle leaves all her money to Boys and Girls Club

  • Tom leaves all his money to his mistress Crystal

Explanation

Question 19 of 19

1

If Karla inherits a house worth $1M from her mother Bella, she will have to include it in her income for that year.

Select one of the following:

  • True
  • False

Explanation

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