Practicing Financial Planning For Professionals And Cfp Aspirants 12th Edition By Sid Mittra – Test Bank
Chapter 11
BASIC FEDERAL INCOME TAX STRUCTURE
Multiple Choice Questions
Question 1. Mr and Mrs Jordan of ages 66 and 64 respectively, file a joint return. How much can they deduct if they elect to use standard deduction? Use the 2015 tax rates.
A. $5,950
B. $8,700
C. $11,900
D. $12,600
E. $14,200
Answer: D $12,600
Question 2. How long must an investment be held before it is considered long-term?
A. 6 months
B. 12 months
C. 24 months
D. 18 months
E. It depends on the type of investment
Answer: B
Question 3. The “wash sale” rule applies if an investor purchases substantially identical securities within what time period?
A. 30 days
B. 31 days
C. 60 days
D. 61 days
E. None of the above represents the correct answer
Answer: A
Question 4. With respect to earned, passive, and portfolio incomes, which of the following statements is not true?
A. All gains are taxed as ordinary income
B. All losses are netted against each other
C. Losses are distinct with respect to each other and a loss from one type may not be used to offset income from another type
D. A and C
E. All of the above statements are true
Answer: B
Question 5. Which of the following statements are true with respect to the sale of a principal residence?
A. A one life-time exclusion of $125,000 is allowed for taxpayers under age 55
B. All of the gains from the sale need not be used to purchase another residence
C. The original cost basis is adjusted to include all costs related to the improvement of the property (i.e. selling, remodeling, landscaping, etc.)
D. Loss of a sale of residence is fully deductible
E. B and C only
Answer: E
Question 6. Suppose in 2015 an investor had a long-term capital loss of $4,000. What is the proper tax treatment of this loss?
A. deduct the full amount of $4,000
B. None of the $4,000 loss is deductible
C. It is not deductible because the loss must exceed 7.5% of AGI
D. Deduct $3,000 in 2015 and carry forward $1,000
E. None of the above
Answer: D
Question 7. The law specifies that ________ of Social Security benefits paid to couples with AGI above ________ would be taxed:
A. 85%; $30,000
B. 50%; $30,000
C. 50%; $44,000
D. 85%; $44,000
E. 85%; $40,000
Answer: D
Question 8. Which of the following are not deductible as itemized deductions?
A. Sales taxes
B. Personal property taxes
C. State income taxes
D. Federal income taxes
E. A and D
Answer: E
Question 9. Mr and Mrs Bryan gave a valuable painting worth $65,000 to their favorite charity. The charity sold the painting three weeks later. If the Bryans purchased the painting for $35,000, how much can they deduct from their taxable income for federal tax purposes?
A. $35,000
B. $10,000
C. $30,000
D. $0
E. $65,000
Answer: A
Question 10. Which of the following statements is true with respect to moving expenses?
A. They are deductible in full whether the taxpayer uses the itemized or the standard deduction
B. They must exceed 2% of the taxpayer’s AGI
C. House hunting trips and living expenses at the new location are fully deductible
D. The cost of moving household goods is deductible within limits
E. None of the above are true statements
Answer: E
