Stocks & Dividends Flashcards
Whic h of t he f ol l owi ng i s NOT t a x a bl e a s di v i dend i nc ome ?
Cash div ide nd on l i f e i ns ur a nc e pol i c y
Ca s h dividen on s t oc k i n ABC Cor por a t i on
Di vidend on mutual fund which was rein ve s t e d i n mor e s t oc k a nd not s e nt t o t he t a x pa y e r
Dividend t a k e n i n ne w s ha r e s of s t oc k whe r e owner had c hoi c e of t a k i ng c a s h
Cash Dividend on life Insurance
J . R. J a c k s on recieved c a s h dividends of $ 3 , 0 0 0 t hi s y e a r . T he t a x inf ormation on provided that the company indicated that these were qualified dividends . Which of t he f ol lowi ng s t a t e me nt s i s t r ue ?
T he di v i de nds a r e t a x - f r e e be c a us e t hey are viewed a s a return of c a pi t a l t o the owner .
T hese dividends are taxed a t he lower rate t ha t i s a ppl i c a bl e f or net long - t e r m capital gains..
T hese dividends must have been recieved by a f or e i g n c or por a t i on.
Unl e s s t he s t oc k wa s he l d f or mor e than a y e a r , t he s e di v i de nds woul d be t a x e d a t the rate a ppl i c a bl e t o s hor t - t e r m
c a pi t a l g a i ns .
These dividends are taxed at a lower rate that is applicable f or net long - t e r m capital gains..
The f ol l owi ng statements about Dividends received from a dividend reinvestment pl a n a r e c or r e c t E XCE PT:
Reinvested Dividends are not taxable i f not re move d f r om t he pl a n.
Re i nv e s t e d -di v i de nds - a r e - t a x a bl e- i n -t he y e a r pa i d.
Re i nv e s t e d -dividends -are taxable aand -are added t o the ba s i s of t he s t oc k or mutual fund
Re i nv e s t e d -di v i de nds- a r e - t r e a t e d -a s- or di na r y or qua l i f i e d di v i de nds .
Re i nv e s t e d di v i de nds are not t a x a bl e i f not re move d f r om t he pl a n.
Re i nv e s t e d di v i de nds a r e not t a x a bl e i f nDi v i de nds a r e t a x a bl e a s i nc ome whe n r e c e i v e d. T he f a c t t ha t t he y a r e r e - i nv e s t e d doe s not ma t t e r . T he que s t i on
c ont a i ns t he wor d E XCE PT , whi c h i s i nt e nde d t o t r i c k y ou. Al l a r e c or r e c t E XCE PT i mpl i e s t ha t t he a ns we r i s t he onl y
one t ha t i s F AL S E . Don’ t f a l l f or t hi s t r i c k .
A distribution of stock , or r i g ht s t o acquired stock in the di s t r i but i ng c or por a t i on, is not i included in t he r e c i pi e nt ‘ s g r os s
i nc ome unl e s s :
Shareholders have t he choice to receive c a s h or other property instead of s t oc k or s t oc k r i g ht s .
T he distribution gives Cash or other propert y t o some shareholders and increases i n t he % interest In the corp assets or earnings to the shareholders.
T he distribution is preferred stock f or some c ommon s hareholders a nd common s t oc k t o ot he r s .
Al l of t he above
All the above
J a ni c e dropped of her annual records for the preparation of her tax return De t e r mi ne t he amount of t a x a bl e i nt e r e s t t o be
r e por t e d on J a ni c e ‘ s r e t ur n.
• $ 9 0 0 i nt e r e s t e a r ne d on he r 1 6 - y e a r - ol d s on’ s s a v i ng s a c c ount ( he ha d no ot he r i nc ome a nd wa s not r e qui r e d t o f i l e a
t a x r e t ur n)
- $ 5 0 int i nc ome r e por t e d on F or m 1 0 9 9 - OI D
- $ 2 0 0 i nt INC certificate of DEPt ( y our c l i e nt borrowed t he e nt i r e $ 3 , 0 0 0 t o pur c ha s e t hi s CD)
• $ 2 0 v a l ue of a c a l c ul a t or t ha t wa s a gift from t he ba nk f or ope ni ng a $ 2 , 0 0 0 s a v i ng s a c c ount
•
$ 6 , 0 0 0 r e c e i v e d on a pr i or y e a r i ns t a l l me nt s a l e , of whi c h $ 4 , 0 0 0 i s i nt e r e s t a nd $ 2 , 0 0 0 i s pr i nc i pa l
$ 4 , 1 5 0
$ 7 , 1 7 0
$ 5 , 1 5 0
$ 4 , 2 7 0
4 , 2 7 0
A pa r e nt ma y e l e c t ( not r e qui r e d) t o r e por t a c hi l d’ s i nc ome on he r t a x r e t ur n, pr ov i de d t he c hi l d’ s i nc ome i s onl y
f r om i nt e r e s t a nd di v i de nds , a nd t he c hi l d’ s g r os s i nc ome i s l e s s t ha n $ 1 0 , 5 0 0 i n 2 0 1 7 . I f t he c hi l d i s not r e qui r e d t o
f i l e a r e t ur n, t he pa r e nt c a nnot ma k e t he e l e c t i on. I n t hi s c a s e , t he e l e c t i on i s not ma de .
$ 5 0 i nt e r e s t on 1 0 9 9
$ 2 0 0 i nt e r e s t on CD
$ 2 0 v a l ue of c a l c ul a t or
$ 4 , 0 0 0 i ns t a l l me nt s a l e i nt e r e s t
$ 4 , 2 7 0 i nt e r e s t r e por t e d on he r r e t ur n
Donald provide f or hi s own s uppor t from his ivestment i nc ome . I n 2 0 1 5 , he e a r ne d $ 1 , 0 0 0 of i nt e r e s t on hi s mone y
ma r k e t a c c ount .
He ma de wi t hdr a wa l s of t he i nt e r e s t t ot a l i ng $ 7 0 0 i n 2 0 1 6 a nd $ 3 0 0 i n 2 0 1 7 . How muc h of t he or i g i na l
$ 1 , 0 0 0 s houl d Dona l d r e por t a s i nt e r e s t e a r ne d i n 2 0 1 7 ?
- 0 - .
$ 1 , 0 0 0
$ 7 0 0
$ 3 0 0
0
he i nt e r e s t wa s e a r ne d i n 2 0 1 5 . S i nc e there i s no evidence t ha t Dona l d i s not a c a s h ba s i s t a x pa y e r , a l l of t he
i nt e r e s t i s r e por t e d on hi s r e t ur n f or 2 0 1 5 - - t he y e a r of c ons t r uc t i v e r e c e i pt . None on t he i nt e r e s t e a r ne d i n 2 0 1 5 i s
r e por t e d on e i t he r t he 2 0 1 6 or 2 0 1 7 r e t ur ns .
I n 2 0 1 7 , Mi g ue l receives of $ 6 , 0 0 0 f r om muni c i pa l bonds , $ 4 , 0 0 0 f r om c e r t i f i c a t e s of deos i t , $ 2 , 0 0 0 t ha t he
r e i nv e s t e d f r om c or por a t e bonds , $ 7 , 0 0 0 f r om a mut ua l f und hol di ng municipal bonds , a nd $ 1 , 0 0 0 f r om a s a v i ngs account
How muc h t a x a bl e i nt e r e s t doe s Mi g ue l r e por t on hi s 2 0 1 7 t a x r e t ur n?
$ 5 , 0 0 0 .
$ 7 , 0 0 0 .
$ 6 , 0 0 0 .
$ 1 3 , 0 0 0 .
7000
I nt e r e s t r e c e i v e d on a n obl i g a t i on i s s ue d by a x a bl e . $ 4 , 0 0 0 + $ 2 , 0 0 0 + $ 1 , 0 0 0 = $ 7 , 0 0 0
Wa r r e n owns s e v e r a l t y pe s of bonds . Whi c h of t he f ol l owi ng i s NOT t r ue a bout or i g i na l i s s ue di s c ount ( OI D) ?
e OI D rul e s do not a ppl y t o U. S . S a v i ng s Bonds .
OI D i s i nc l ude d a s i ncome ov e r t he t e r m of a debt s e c ur i t y r e g a r dl e s s of whe t he r pa y me nt s a r e r e c e i v e d f r om t he
i s s ue r .
T he a mount of OI D i s t he di f f e r e nc e between t he s t a t ed r ede mpt i on pr i c e a t ma t ur i t y a nd t he pa r v a l ue .
OI D i s t r e a t e d a s z e r o i f i t i s l e s s t ha n one - f our t h of 1 % ( . 0 0 2 5 ) of t he s t a t e d r e de mpt i on pr i c e a t ma t ur i t y mul t i pl i e d by
t he numbe r of y e a r s f r om t he da t e of i s s ue t o ma t ur i t y .
OI D i s t he di f f e r e nc e be t we e n t he s t a t e d r e de mpt i on pr i c e a t ma t
T he a mount of OI D i s t he di f f e r e nc e be t we e n t he s t a t e d r e de mpt i on pr i c e a t ma t ur i t y a nd t he pa r v a l ue .
Ir
T a x a bl e i nt e r e s t i s g e ne r a l l y r e por t e d t o a t a x pa y e r on whi c h f or ms ?
F or m 1 0 9 9 - MI S C; S c he dul e I NT
F or m 1 0 9 9 - I ; S c he dul e D
F or m 1 0 9 9 - I NT ; S c he dul e K- 1 f or pa r t ne r s hi ps a nd S c or por a t i ons
F or m 1 0 9 9 - I NT ; S c he dul e B
F or m 1 0 9 9 - I NT ; S c he dul e K- 1 f or pa r t ne r s hi ps a nd S c or por a t i ons
Da v e a nd Dy a n a r e ma r r i e d a nd ha d i nt e r e s t i nc ome on a ba nk s a v i ng s acct of $ 4 , 0 0 0 , i nt e r e s t on f e de r a l t r e a s ur y bonds of $ 3 , 4 0 0 , i nt e r e s t on t he s t a t e i nc ome t a x r e f und of $ 4 0 0 , a nd interest r e s t of $ 1 , 5 0 0 on Ne w Y or k Ci t y bonds . What amounts are included in income $ 4 , 4 0 0 $ 7 , 4 0 0 $ 7 , 8 0 0 $ 9 , 3 0 0
7800
T
Whi c h of t he f ol l owi ng c a n ne v e r qua l i f y a s t a x ex e mpt i nc ome f or a n i ndi v i dua l who i s f i l i ng a f e de r a l i nc ome t a x r e t ur n?
I nt e r e s t on Uni t e d S t a t e s t r e a s ur y bonds
I nt e r e s t on Uni t e d S t a t e s S e r i e s E E bonds
I nt e r e s t on s t a t e bonds
I nt e r e s t on bonds i s s ue d by a t own t o f i na nc e i t s s c hool s y s t e m
nt e r e s t on Uni t e d S t a t e s t r e a s ur y bonds
nt e r e s t r e v e nue on Uni t e d S t a t e s t r e a s ur y bonds i s t a x a bl e on a f e de r a l i nc ome t a x t a x r e t ur n. I nt e r e s t r e v e nue on
US S e r i e s E E bonds i s t a x e x e mpt but onl y whe n i t me e t s s pe c i f i c r ul e s : t he bonds mus t ha v e be e n pur c ha s e d by t he
a x pa y e r who wa s ov e r 2 4 y e a r s ol d a nd t he pr oc e e ds mus t be us e d t o pa y c ol l e g e c os t s f or t a x pa y e r , s pous e or a
e pe nde nt . I nt e r e s t r e v e nue on s t a t e a nd muni c i pa l bonds a r e a l wa y s t a x f r e e on a f e de r a l r e t ur n.
