Chapter 7 Smart Book tax Question and answers 100% correct
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Course
LSTD 2106
Institution
LSTD 2106
Chapter 7 Smart Book tax Question and answers 100% correct
Which of the following types of income is generated from passive investments rather than portfolio investments? - correct answer -operating income
True or false: Interest income is generally taxed at lower capital gains rates. - co...
Chapter 7 Smart Book tax Question and
answers 100% correct
Which of the following types of income is generated from passive investments
rather than portfolio investments? - correct answer ✔-operating income
True or false: Interest income is generally taxed at lower capital gains rates. -
correct answer ✔-false (Interest income is taxed at ordinary rates, while
dividend income is generally taxed at capital gains rates.)
Select all that apply
Which of the following choices determine the amount and the timing for
recognizing interest income? (Check all that apply.)
Multiple select question.
If bonds were issued at a premium, taxpayers may amortize the premium over
the life of the bond resulting in a decrease in interest income.
If bonds are purchased at a premium in the secondary market, the premium
cannot be amortized, but is added to the basis of the bonds.
The actual interest payments received are included in gross income.
If bonds are purchased at a discount in the secondary market, the discount is
recognized as interest income at maturity.
If bonds were issued at a premium, special original issue discount rules apply.
- correct answer ✔-If bonds were issued at a premium, taxpayers may
amortize the premium over the life of the bond resulting in a decrease in
interest income.
-The actual interest payments received are included in gross income.
-If bonds are purchased at a discount in the secondary market, the discount is
recognized as interest income at maturity.
,U.S. _______ _________ do NOT pay periodic interest payments, but the
interest accumulates over the term of the bond. - correct answer ✔-savings
bonds
Select all that apply
Regarding portfolio investments, which types of income generally are taxed at
a rate lower than the taxpayer's marginal tax rate? (Check all that apply.)
Multiple select question.
Interest on corporate bonds
Nonqualified dividends
Long-term capital gains
Short-term capital gains
Qualified dividends - correct answer ✔-Long term capital gains
-qualified dividends
True or false: Income from passive investments may be taxed at ordinary
rates, preferential rates, or may be exempt from taxation while income from
portfolio investments will be taxed at ordinary rates.
True false question.TrueFalse - correct answer ✔-false (reason:
Passive investments generate ordinary income or losses. Portfolio income
may be taxed a various rates or be exempt from taxation altogether.)
Click and drag on elements in order
Qi, Julian, and Omar are all in the 24% tax bracket. Qi has received $3,000 in
corporate bond interest, Omar $2,500 in savings account interest, and Julian
$2,500 in dividends from a US corporation. Rank the taxpayers by their tax
liability from the amounts received, from least to greatest.
-Julians 2500
-Omars 2500
Which of the following types of assets does NOT qualify as a capital asset?
Multiple choice question.
Assets classified as "personal use"
Assets used in a trade or business
Assets held as investments - correct answer ✔-Assets used in a trade or
business (Reason:
Assets USED in a business are not considered to be capital assets. If a
business has assets that it holds as investments, these will qualify as capital
assets.)
Select all that apply
Which of the following choices concerning the recognition of interest income
for corporate bond are CORRECT? (Check all that apply.)
Multiple select question.
If bonds were issued at a discount, special original issue discount rules apply.
If bonds are purchased at a discount in the secondary market, the discount is
amortized over the remaining life of the bond.
If bonds are purchased at a premium in the secondary market, the premium
can be amortized or added to the basis of the bond.
The actual interest payments received are included in gross income.
If bonds were issued at a premium, taxpayers must amortize the premium
over the life of the bond resulting in an increase in interest income. - correct
answer ✔-If bonds were issued at a discount, special original issue discount
rules apply.
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