3. Interest, Dividends, and Gains

Question 1

Interest is taxable income. What about federal bond interest

Answer 1

Certain taxpayers and certain bond interest is offset by amortization of the bond premium

Question 2

State and local government bonds/obligations are not taxable. What is reported?

Answer 2

1. State/local government bonds and obligations: interest and mutual fund dividends
2. US Possession bonds: interest on the obligation

Question 3

Tax-Exempt (reportable): US Series EE Savings Bonds details:

Answer 3

1. only used to pay for higher education for taxpayer, spouse, or dependents
2. taxpayer is over 24 when bond issued
3. married filed jointly
4. taxpayer must meet certain income requirements.

Question 4

for non cash items:

Taxable = income is FMV and basis is FMV

What is non taxable income =

Answer 4

no income and basis is NBV

Question 5

Dividends are reported on a Schedule ____

Answer 5

B

Question 6

Taxability of dividend is determined by the amount of the company’s earning and profits…true or false

Answer 6

true.

Question 7

What’s the holding period for qualified dividends.

Answer 7

stock must be:
1. held for more than 60days of the 120 day holding period that starts 60 days before the last dividends distribution date

Question 8

What are some examples of a non qualified dividend?

Answer 8

• ESOP (employer stock ownership plan)
• short sale positions
• certain foreign corporations
• dividends from credit unions, mutual savings banks, building and loan assoc., farmers cooperatives, mutual insurance corporations

Question 9

Qualified dividends are taxed at the same tax rate as…..

Answer 9

long term capital gains (LTCG)

Question 10

Dividend income: what is excluded from income?

Answer 10

1. Return of Capital - reduces investment
2. Stock split - original basis is spread over shares after split

Question 11

What Schedule is used for Gains and Losses on Disposition of Property?

Answer 11

Schedule D