C237- TAXATION EXAM WITH ACCURATE ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\||
DETAILED SOLUTIONS ||//\\||
. What is the nature of a progressive tax rate structure? - ✔✔increasing marginal tax rate as
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the tax base increases-federal taxes is an example
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Which two expenses are a tax-free use of a qualified tuition plan (QTP) distribution? -
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✔✔QTP (such as 529 plans) allow for qualified higher education expenses such as tuition, ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\||
room & board, books, supplies, computer equipment/software
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Which event would result in taxable income? - ✔✔Insolvent means they qualify as having
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less assets than their liabilities discharged in bankruptcy is not taxable forgiveness through
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public service is not taxable at the federal level ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\||
Which type of gain does a taxpayer have if the taxpayer owns stock that has appreciated in
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value? - ✔✔The stock has appreciated in value, but has not been sold. Therefore, it is an
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unrealized gain currently. Once the stock is sold, if it has a gain, it will be a realized capital ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\||
gain if it has appreciated in value and is sold for higher than what it was purchased at
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minus any fees. ||//\\|| ||//\\||
An individual purchases a piece of property with a fair market value of $30,000 for $28,000.
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The individual takes out a loan for $14,000 and pays the other $14,000 in cash. In addition,
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the individual pays $500 in transactions costs to purchase the property and $200 of delivery
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costs. What is the basis for the property? - ✔✔The basis is only what was paid for the
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property (cash + mortgage + all fees) $14,000 + $14,000 + 500 + $200 = $28,700 ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\||
An individual purchases a piece of property with a fair market value of $50,000 for $54,000.
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The individual uses a loan for $44,000 and pays the other $10,000 in cash. In addition, the
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individual pays $1,000 in transactions costs to purchase the property and expects to earn ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\||
$5,000 per year from renting the property to others. What is the basis for this property? -
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DETAILED SOLUTIONS ||//\\||
. What is the nature of a progressive tax rate structure? - ✔✔increasing marginal tax rate as
||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\||
the tax base increases-federal taxes is an example
||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\||
Which two expenses are a tax-free use of a qualified tuition plan (QTP) distribution? -
||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\||
✔✔QTP (such as 529 plans) allow for qualified higher education expenses such as tuition, ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\||
room & board, books, supplies, computer equipment/software
||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\||
Which event would result in taxable income? - ✔✔Insolvent means they qualify as having
||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\||
less assets than their liabilities discharged in bankruptcy is not taxable forgiveness through
||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\||
public service is not taxable at the federal level ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\||
Which type of gain does a taxpayer have if the taxpayer owns stock that has appreciated in
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value? - ✔✔The stock has appreciated in value, but has not been sold. Therefore, it is an
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unrealized gain currently. Once the stock is sold, if it has a gain, it will be a realized capital ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\||
gain if it has appreciated in value and is sold for higher than what it was purchased at
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minus any fees. ||//\\|| ||//\\||
An individual purchases a piece of property with a fair market value of $30,000 for $28,000.
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The individual takes out a loan for $14,000 and pays the other $14,000 in cash. In addition,
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the individual pays $500 in transactions costs to purchase the property and $200 of delivery
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costs. What is the basis for the property? - ✔✔The basis is only what was paid for the
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property (cash + mortgage + all fees) $14,000 + $14,000 + 500 + $200 = $28,700 ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\||
An individual purchases a piece of property with a fair market value of $50,000 for $54,000.
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The individual uses a loan for $44,000 and pays the other $10,000 in cash. In addition, the
||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\||
individual pays $1,000 in transactions costs to purchase the property and expects to earn ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\||
$5,000 per year from renting the property to others. What is the basis for this property? -
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