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Exam 7: Investments

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Question 41

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Capital loss carryovers for individuals are carried forward indefinitely.

A) True
B) False

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Question 42

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Two advantages of investing in capital assets are (1) gains are generally deferred and (2) gains are generally taxed at preferential rates.

A) True
B) False

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Question 43

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Interest earned on U.S. savings bonds is interest received at sale or maturity but must be taxed annually.

The netting process for capital gains (losses) with 0/15/20 percent, 25 percent, and 28 percent capital assets helps maximize the tax benefit of:

How can electing to include preferentially-taxed capital gains and qualifying dividends in the computation of net investment income be beneficial to taxpayers?

One primary difference between corporate and U.S. Treasury bonds is:

Taxpayers may make an election to include preferentially-taxed capital gains and qualified dividends in investment income and deduct more investment interest expense currently if they are willing to subject this income to ordinary tax rates.

On December 1, 20X7, George Jimenez needed a little extra cash for the upcoming holiday season, and sold 250 shares of Microsoft stock for $50 per share less a broker's fee of $200 for the entire sale transaction. Prior to the sale, George held the following blocks of Microsoft stock (associated broker's fee paid at the time of purchase): (Do not round intermediate calculations.) If his goal is to minimize his current capital gain, how much capital gain will George report from the sale?

Investment income includes:

What is the correct order of the loss limitation rules?

Unused investment interest expense:

On January 1, 20X1, Fred purchased a corporate bond with a face value of $50,000 from the secondary market at a premium. The bond has a coupon rate of 8 percent and matures in five years. The market rate of the bond is a 6 percent annual before-tax return compounded semiannually. If Fred was trying to minimize interest income, what is the least amount of interest income Fred may report on his 20X1 tax return? Present value of $1, Present value of Annuity $1 (Do not round intermediate calculations. Round your final answer to 2 decimal places.)

The amount of interest income a taxpayer recognizes when he redeems a U.S. savings bond is:

Mr. and Mrs. Smith purchased 100 shares of stock for $45 per share on June 30, 20X6. On March 30, 20X8, the Smith family decides to sell these shares for $30 generating a loss of $15 per share. On April 15, 20X8, the Smith family realized they made a mistake and repurchased 100 shares for $35 per share. When will the Smith family receive a tax benefit for the loss on the March 30, 20X8 sale?