AWMA Designation Module 5: Questions with verified
answers
A taxpayer incurs withholding on a retirement plan distribution in
September of the current year. For estimated tax purposes, the
withholding is treated as Ans✓✓✓ A)made during the third quarter of
the year.
B)withheld evenly throughout the tax year.
C)applied to the next tax year.
D)made evenly during the third and fourth quarters of the year.
Withholding from IRAs, qualified plans, and other income sources is
treated as having been made evenly throughout the current year for
cash basis taxpayers, even if the withholding is a lump sum at year-end.
This may be very useful in avoiding an underpayment penalty, as the
withholding late in the year is treated as having been made evenly
throughout the year.
Assume that a taxpayer has a self-employment tax liability of $21,000
and an additional Medicare tax of $150. What is the amount of the
adjustment to income as a result of these additional taxes? Ans✓✓✓
A)$12,516
B)$10,500
C)$21,000
D)$10,575
,A taxpayer is allowed to deduct one-half of his or her self-employment
tax liability as an adjustment to income. The adjustment is computed
without regard to the additional Medicare tax.
Assume that, during the current tax year, Jake has a short-term capital
loss of $9,000 from the sale of stocks. He also has a long-term capital
gain from the sale of a sports memorabilia collection of $5,500 and has
unrecaptured Section 1250 income of $14,000 from the sale of a
residential rental property. Jake is in the 32% marginal income tax
bracket. What is the tax result from the capital transactions? Ans✓✓✓
A)$10,500 unrecaptured Section 1250 income taxed at 25%
B)$3,500 short-term capital loss carryforward and $14,000
unrecaptured Section 1250 income taxed at 25%
C)$5,000 unrecaptured Section 1250 income taxed at 25% and $5,500
collectibles gain taxed at 28%
D)$10,500 of Section 1202 gain that is not taxed
The short-term capital loss is first used to offset the collectibles gain of
$5,500. This leaves a short-term capital loss of $3,500. This is next used
to offset the 25% gain. The $14,000 is offset by the $3,500 remaining
capital loss. This leaves $10,500 of unrecaptured Section 1250 income,
taxed at a maximum 25% rate. This is the most favorable manner of
offsetting the capital losses against the capital gains.
Assume that, in the current year, Thaddeus has the following:
, investment interest expense of $4,000, interest income and short-term
capital gains of $3,600, and investment adviser's fees of $5,000.
Assume that Thaddeus has AGI of $225,000. What amount of
investment interest expense, if any, that may be deducted in the
current year? Ans✓✓✓ A)$0
B)$5,000
C)$4,000
D)$3,600
The investment interest expense of $4,000 is deductible up to the
amount of net investment income. The net investment income is the
$3,600 of interest and short-term capital gains. Thus, of the $4,000 of
investment interest paid, $3,600 is currently deductible as investment
interest expense, and the remaining $400 of investment interest
expense may be carried forward into next year's calculation.
Five years ago, Jason received a gift of 1,000 shares of common stock
from his parents. The fair market value of the stock on the date of the
gift was $75 per share. His parents had purchased the stock four years
earlier at $47 per share. Jack sold this stock for $110 per share earlier
this week.
What was Jason's per share basis in the stock when it was sold?
Ans✓✓✓ A)$47
B)$122
C)$75
answers
A taxpayer incurs withholding on a retirement plan distribution in
September of the current year. For estimated tax purposes, the
withholding is treated as Ans✓✓✓ A)made during the third quarter of
the year.
B)withheld evenly throughout the tax year.
C)applied to the next tax year.
D)made evenly during the third and fourth quarters of the year.
Withholding from IRAs, qualified plans, and other income sources is
treated as having been made evenly throughout the current year for
cash basis taxpayers, even if the withholding is a lump sum at year-end.
This may be very useful in avoiding an underpayment penalty, as the
withholding late in the year is treated as having been made evenly
throughout the year.
Assume that a taxpayer has a self-employment tax liability of $21,000
and an additional Medicare tax of $150. What is the amount of the
adjustment to income as a result of these additional taxes? Ans✓✓✓
A)$12,516
B)$10,500
C)$21,000
D)$10,575
,A taxpayer is allowed to deduct one-half of his or her self-employment
tax liability as an adjustment to income. The adjustment is computed
without regard to the additional Medicare tax.
Assume that, during the current tax year, Jake has a short-term capital
loss of $9,000 from the sale of stocks. He also has a long-term capital
gain from the sale of a sports memorabilia collection of $5,500 and has
unrecaptured Section 1250 income of $14,000 from the sale of a
residential rental property. Jake is in the 32% marginal income tax
bracket. What is the tax result from the capital transactions? Ans✓✓✓
A)$10,500 unrecaptured Section 1250 income taxed at 25%
B)$3,500 short-term capital loss carryforward and $14,000
unrecaptured Section 1250 income taxed at 25%
C)$5,000 unrecaptured Section 1250 income taxed at 25% and $5,500
collectibles gain taxed at 28%
D)$10,500 of Section 1202 gain that is not taxed
The short-term capital loss is first used to offset the collectibles gain of
$5,500. This leaves a short-term capital loss of $3,500. This is next used
to offset the 25% gain. The $14,000 is offset by the $3,500 remaining
capital loss. This leaves $10,500 of unrecaptured Section 1250 income,
taxed at a maximum 25% rate. This is the most favorable manner of
offsetting the capital losses against the capital gains.
Assume that, in the current year, Thaddeus has the following:
, investment interest expense of $4,000, interest income and short-term
capital gains of $3,600, and investment adviser's fees of $5,000.
Assume that Thaddeus has AGI of $225,000. What amount of
investment interest expense, if any, that may be deducted in the
current year? Ans✓✓✓ A)$0
B)$5,000
C)$4,000
D)$3,600
The investment interest expense of $4,000 is deductible up to the
amount of net investment income. The net investment income is the
$3,600 of interest and short-term capital gains. Thus, of the $4,000 of
investment interest paid, $3,600 is currently deductible as investment
interest expense, and the remaining $400 of investment interest
expense may be carried forward into next year's calculation.
Five years ago, Jason received a gift of 1,000 shares of common stock
from his parents. The fair market value of the stock on the date of the
gift was $75 per share. His parents had purchased the stock four years
earlier at $47 per share. Jack sold this stock for $110 per share earlier
this week.
What was Jason's per share basis in the stock when it was sold?
Ans✓✓✓ A)$47
B)$122
C)$75
