Chapter 17 Taxation of Investments

Question 1

Double basis

Answer 1

Stock gifted at a loss
if sold at a loss must use value at gift
if sold for a gain must use original basis
if sold between gifted value and original basis no gain or loss

Question 2

Ordinary income

Answer 2

wages/interest
10-37%

Question 3

Passive income

Answer 3

LP
S corp
LLP
Real estate
taxed as ordinary income rates

Question 4

Cap gain rates

Answer 4

max 20% including net investment income tax
Collectibles 28%

Question 5

Qualified dividends

Answer 5

taxed at LTG rates
Must be held minimum of 60 days before x date
ordinary dividends taxed at marginal tax rate

Question 6

Net investment income tax

Answer 6

3.8%
MFJ $250,000
Single $200,000

Question 7

OID

Answer 7

must be included in taxable income at ordinary rates as it accrues each year

Question 8

Private activity muni bonds

Answer 8

are subject to AMT

Question 9

Taxation of futures contracts

Answer 9

Contract must be marked to market on the last day of taxpayer’s tax year.
60% long term gain/loss
40% short term gain/loss

Question 10

Real estate - dealer held

Answer 10

When it’s held for inventory gains are ordinary income

Question 11

Real estate - trade or business

Answer 11

section 1031 taxable at cap gains rates subject to adjustment for recapture of depreciation

Question 12

Real estate - personal use/investment

Answer 12

cap gains tax rates

Question 13

real estate deduction

Answer 13

real estate held as investment - loss deductible as capital loss
held for personal purposes - no loss deduction
personal residence - $250k single/$500k mfj excluded from taxation - rest taxed at capital gains rates