CPE Accounting & Tax Inst. Course# 10071-2001 Investment Income & Expenses

CPE Accounting & Tax Institute
Course Study Guide
Final Exam
Course# 10071-7
Investment Income & Expenses 2008 IRS Updated

CPE & CE Credit: 18 Hours (Tax)
Prerequisite: None
Price: $199
Course Level: Basic
Recommended Study Time: 36 Hours

Answer form | Home Page

Please submit answer form with multiple choice or true/false answers for the following questions.

What's New for 2007

Capital asset treatment for self-created musical works

1. For 2007 and later years, you can elect to treat musical compositions and copyrights in musical works as capital assets.

Tax shelters and other reportable transactions

2. Transactions with a brief asset holding period is no longer a reportable transaction category for transactions entered into after August 2, 2007.

What's New for 2008

Maximum tax rate on qualified dividends and net capital gain reduced

3. In tax years beginning after 2007, the 5% maximum tax rate on qualified dividends and net capital gain is reduced to zero percent.

Chapter 1 Investment Income - General Information

Tax on Investment Income of a Child Under Age 18

4. Investment income of a child under age 18, may be partially taxed at the parent's tax rate.

Backup Withholding
5. Investment income is generally subject to regular withholding.

6. Backup withholding is required if you refuse to provide a payer of interest your social security number or an employer identification number.

Income from Property Given to a Minor
7. Kent transferred securities to his son Brett. Income from these securities is used exclusively to satisfy Kent's child support obligation to Brett. The income from these securities is taxable to Brett.

Interest Income
Information-Reporting Requirement
8. Since exempt-interest dividends are not taxable, you are not required to show them on your tax return.

Taxable Interest - General

Money market funds

9. Generally, amounts you receive from money market funds should be reported as dividends, not as interest.

A. True

B. False

Taxable Interest
Money borrowed to invest in money market certificate
10. Interest on money borrowed to meet a minimum deposit for a money market certificate must be deducted on Schedule A 1040.

Gift for Opening Account
11. Shirley received a $20 toaster for opening a new savings account at her local savings bank. Shirley's Form 1099-INT would include the value of the toaster as interest income for the year.

Interest Income on Frozen Deposits
12. Elmer earned $200 in interest on a frozen savings account. Elmer withdrew $20 but could not withdraw any more for the year. Elmer's income during the year would include only $20 in interest from this account.

Below-Market Loans
Exception for Loans of $10,000 or Less
13. Jan provided a $2,000 loan to Dave her nephew to purchase a home. The loans stated interest is 2% below the applicable federal rate and is payable annually on December 31. Jan must report 2% of the outstanding balance of the loan each year as forgone interest income.

Limit on Forgone Interest for Gift Loans of $100,000 or Less
14. Clyde made below-market gift loans to his son Andrew. The outstanding balances of such loans total $100,000. Andrew's net investment income for the year was $1,000. Clyde must include forgone interest of $1,000 in his income.

U.S. Savings Bonds
Series EE and Series I Bonds
15. A cash method taxpayer must wait until interest on Series EE bonds is received before reporting interest income on such bonds.

Co-Owners
16. Interest on US savings bonds issued in more than one name as co-owners, is generally taxable to the co-owner who bought the bond.

Ownership Transferred
17. Myron bought Series EE bonds entirely with his own funds and elected not to report the accrued interest each year. Five years after purchasing the bonds, Myron transferred the bonds to his daughter Cindy. Myron must include in his income in the year of transfer, the deferred accrued interest from the date of original issuance of the bonds to the date of transfer.

Purchased Jointly
18. Steve and Sharon purchased a Series EE bond jointly. Pursuant to a separation, they had the bonds reissued in Sharon's name in the current year. Sharon must include in her current year gross income all of the interest income earned as a former CO-owner that she has not previously reported.

Decedent Who Postponed Reporting Interest
19. Sandra, a cash basis taxpayer, died and left her brother Kevin a $10,000 Series E bond. She bought the bond for $7,000 and chose not to report interest each year. At the date of death, $1,000 in interest had accrued and was included in the estate. If the executor includes the $1,000 of interest Sandra's final tax return, it becomes income to Kevin.

Savings Bonds Distributed from a Retirement or Profit Sharing Plan
20. If you acquire a US savings bond in a taxable distribution from a retirement plan, you do not have to include the redemption value in your income for the year it was acquired.

Savings Bonds Traded
21. In the current year, Jake traded Series EE bonds with accrued interest of $325 and a redemption value of $3,272 for Series H bonds. Jake received $3,000 in Series H bonds and $272 in cash. Jake did not previously report interest on the Series EE bonds. Jake must report $272 in taxable income for the current year.

Education Savings Bond Program
22. If married, you must file a joint return to qualify for the Education Savings Bond Program.

US Treasury Bills, Notes, and Bonds
23. Interest income from notes that are direct debt obligations of the US Government, is not subject to federal income tax.

Insurance
24. Life insurance proceeds paid to the beneficiary of the insured are usually taxable.

State or Local Government Obligations
Tax-Exempt Interest
25. Interest on state or local government obligations used to finance government operations is generally not taxable.

Information Reporting Requirement
26. If you received tax-exempt interest, you do not have to include it on your income tax return

Federally Guaranteed Bonds
27. Interest on state or local obligations guaranteed by the Federal Housing Administration is taxable.

Qualified Bond
28. Interest on a qualified bond is taxable if it is a private activity bond.

Market Discount
29. The market discount on a tax-exempt bond is not tax-exempt.

Discount on Debt Instruments
30. The discount on municipal bonds is taxable in most instances.

Original Issue Discount
31. Sarah bought a 10-year bond with a stated redemption price at maturity of $20,000. The bond was issued at $19,700. Sarah can disregard (treat as zero) the discount as "de minimis" for income tax purposes.

Exceptions to Reporting OID
32. Original Issue Discount rules for publicly offered, long-term instruments specifically apply to US savings bonds.

Premium
33. When you sell or redeem an instrument bought at a premium, the difference between the sale or redemption price and the purchase price is an ordinary (not capital) gain or loss.

Applying the OID Rules
Debt Instruments Issued After 1984
34. For debt instruments issued after 1984 and held as a capital asset, you only report the OID at the time you sell the instrument.

Stripped Bonds and Coupons with OID
Figuring OID
35. Rules for figuring OID on stripped bonds and stripped coupons is dependent upon the date issued.

Market Discount Bonds
36. When you buy a market discount bond and do not accrue the market discount over the period you own the bond as current income, you must recognize ordinary income up to the amount of the market discount when you dispose of the bond.

Discount on Short-Term Obligations
37. Accrued discount and interest on short-term taxable obligations must be included in current income when held by

Election To Report All Interest as OID
38. Generally, you can elect to treat all interest on a debt instrument acquired during the tax year as OID and include it in current income.

When To Report Interest Income
Cash Method
39. Cash method taxpayers generally must report interest income in the year actually or constructively received.

Accrual Method
40. Accrual method taxpayers report interest income only if received.

How To Report Interest Income
41. If your interest income is more than $400 you can not use Form 1040EZ.

42. Mary received $300 interest from a seller financed mortgage and the buyer used the property as a home. If Mary files a 1040, she must complete Part I of Schedule B.

Reporting Tax-exempt Interest
43. You should not report interest from an individual retirement arrangement (IRA) as tax-exempt interest.

US Savings Bond Interest Previously Reported
44. If you receive a 1099-INT for US savings bonds interest previously reported, do not report all of the interest shown on your Form 1099-INT.

Worksheet for Savings Bonds Distributed from a Retirement or Profit Sharing Plan
45. If you cashed a savings bond acquired in a taxable distribution from a retirement plan, your interest income includes interest accrued before the distribution and taxed as a distribution from the plan.

Interest on Seller Financed Mortgage
46. You may have to pay a $50 penalty if you sell your home and finance the buyer without reporting buyer name, social security number and address on line 1 of Schedule 1 (Form 1040A) or line 1 of Schedule B (Form 1040).

Dividends and Other Corporate Distributions

Qualified Dividends

47. Qualified dividends are the ordinary dividends that are subject to the same 5% or 15% maximum tax rate that applies to net capital gain.

A. True

B. False

Dividends used to buy more stock
48. You must report as income any service charge subtracted from ordinary cash dividend before the dividends are used to by additional stock.

Capital Gain Distributions
49. Capital gain distributions from a mutual fund are reported as long term capital gains regardless of how long you owned your shares in the mutual fund.

Undistributed Gains of Mutual Funds
50. You do not have to treat undistributed capital gains of mutual funds as distributions unless you actually receive them.

Nontaxable Distributions Return of Capital
Basis adjustment
51. A return of capital reduces the basis of your stock and is not taxed until your basis in the stock is fully recovered.

Distributions Less Than Basis
52. You must have received the final distribution in a liquidation that results in cancellation of stock before you can report a capital loss for distributions less than basis.

Distributions of Stock and Stock Rights
Taxable Stock Dividends and Stock Rights
53. Distribution of stock rights to you are taxable when

Preferred Stock Redeemable at Premium
54. If you hold preferred stock having a redemption price higher than its issue price, the redemption premium difference is not a constructive distribution, if the preferred stock was issued before October 10, 1990 with a redemption premium less than 10% of issue price and not redeemable for five years.

Other Distributions
Information reporting requirement
55. Exempt-interest you receive from a regulated investment company does not need to be shown on your tax return because it is not included in your income.

How To Report Dividend Income
56. If you receive dividend income you can use Form 1040EZ.

Dividends Received on Restricted Stock
57. Dividends received on restricted stock (stock that may not be included in income when received) must be included in your income as wages, not dividends.

Capital Gain Distributions
58. The mutual fund making a distribution should tell you how much is:

Nondividend distributions
59. You do not need to report return of capital distributions until your basis in the stock has been reduced to zero.

Liquidating Distributions
60. A liquidating distribution is not treated as the proceeds from a sale or exchange of the stock and reported on Schedule D (Form 1040).

Stripped Preferred Stock
Treatment of Buyer
61. If you must include certain amounts in your gross income as the buyer of stripped preferred stock, these amounts are reported as other income on line 21 of Form 1040.

REMICS and Other CDOs
62. Amounts includible in income by holders of REMIC regular and residual interests are not taken into account in determining the loss from passive activity.

Regular Interest
63. A REMIC can only have one class of regular interests.

Tax Treatment of REMIC Regular Interests
64. The OID, market discount and income reporting rules for bonds do not apply to REMIC regular interest.

Expenses
65. Deductible expenses incurred by a REMIC and passed through to you are not subject to the 2% of adjusted gross income limit.

Collateralized Debt Obligations (CDOs)
66. CDOs can be secured by a pool of:

S Corporations
67. If you are a shareholder of an S corporation, all current year corporate income or loss is taxed to you at the corporations year end whether or not you actually receive any amount.

Investment Clubs
Investments in Name of Members
68. When an investment is recorded in the name of one club member, this member is a "nominee" and must file an information return with the IRS.

Tax Treatment of the Club
69. For federal tax purposes, an investment club can be treated as a

70. If your investment club is treated as a partnership, its expenses are subject to the 2% AGI limit for partner itemized deductions.

71. If you have a passive activity loss from a partnership, you are not subject to passive activity loss limits.

No Social Security Coverage for Investment Club Earnings
72. If an investment club partnership's activities are limited to investing in stock, a member's share of income is earnings from self-employment.

Club as a Corporation
73. Daniel's investment club is taxed as corporation and files Form 1120. Total distributions the club made to Daniel totaled only $9 for the year. These dividends must be reported on Forms 1096 and 1099-DIV.

Tax Shelters
Introduction
74. A tax shelter that is a projected income investment is subject to restrictions including that it must be registered.

Appraisals of Donated Property
75. If the value of property you donate is less than $5,000 you are not required to obtain a written "qualified" appraisal of its fair market value and attach it to your tax return.

Loss transactions
76. A reportable transaction disclosure statement is required for individuals for any transaction that results in a deductible loss if the gross amount of the loss exceeds $2 million in a single year or $4 million in any combination of tax years.

Substantial Understatement of Tax
77. An important factor in establishing reasonable cause and good faith to avoid a penalty is the extent of your effort to determine your proper tax liability under the law.

Civil Fraud Penalty
78. If there is any underpayment of tax due to civil fraud, a penalty of 75% of this underpayment will be added to your tax.

Investment Expenses
Limits on Deductions
79. Deductions for investment expenses may be limited by:

Other Income (Nonpassive Income)
80. You generally can use passive activity losses to offset portfolio income.

Allocation of Interest Expense
81. Ed borrowed $15,000 and used $14,000 to fix up his home and the remaining $1,000 to invest in stock. Investment interest would be:

Debt Proceeds Deposited in Account
82. Same facts as in #81 above except Ed deposited the $14,000 in a non-interest bearing account. Investment interest would be:

Payments on Debt Require New Allocation
83. In #81 above, if Ed repaid $5,000 of the loan, the interest expense allocation for investment interest would be

When to Deduct Invest Interest
84. On November 1, of the current year, you borrow $10,000 payable in 1 year at 8%. On December 1, of the current year you pay this note with a new note payable in 5 years. If you use the accrual method you may be able to deduct a portion of the interest on the loans through December 31, of the current year.

Interest Paid in Advance
85. If you pay interest in advance for a period that goes beyond the end of the tax year, you can deduct only the interest for that year.

Interest on Margin Accounts
86. A cash-basis taxpayer can deduct interest on margin accounts as investment interest in the year paid.

Deferral of Interest Deduction for Market Discount Bonds
87. The amount you can deduct for interest expense you paid during the year to buy a market discount bond is limited when you do not accrue the market discount and include it in your income currently.

Limit on Deduction
88. Your deduction for investment interest expense is generally not limited to your net investment income.

Choosing to Include Net Capital Gain
89. If you choose to include net capital gain in investment income, you must reduce your net capital gain that is eligible for maximum capital gains rates.

Form 4592
90. Sarah's income for the current year included $1,000 of investment interest and $5,000 of net capital gain. Sarah's eligible investment expenses (other than interest) amounted to $600 after the 2% limit on miscellaneous itemized deductions. If Sarah chooses to include all of her net capital gain in her investment interest, the maximum investment interest expense she could deduct is

Bond Premium Amortization
91. The amortized premium of a bond that yields tax-exempt interest is deductible in determining taxable income.

Taxable Bonds Acquired After October 22, 1986 but Before 1988
92. Select the bonds below that are appropriate to deduct bond premium amortization as interest expense on line 13 of schedule A (Form1040)

Expenses of Producing Income
93. The amount deductible for most income-producing expenses is limited to the total of these miscellaneous deductions that is more than 2% of annual adjusted gross income.

Nondeductible Expenses
94. You can deduct transportation and other expenses that you pay to attend stockholder meetings of companies in which you have stock, if your purpose is to get information to manage your investment.

Expenses for Both Tax-exempt and Taxable Income
95. An accepted method for allocating expenses that are for both tax exempt and taxable income is to do it in the same proportion that each type of income is to total income.

How to Report Investment Expenses
96. To deduct investment expenses, you must itemize deductions on Schedule A (Form 1040).

When to Report Investment Expenses
Unpaid Expenses Owed to Related Party
97. You can deduct interest and other expenses owed to a related cash-basis person even though the amount is not includible in the gross income of that person, if you use the accrual method.

Sales and Trades of Investment Property
Introduction
98. Investment property is property used in a trade or business.

What Is a Sale or Trade
Dividend vs. Sale or Trade
99. A redemption of stock is treated as a sale when it is a distribution in partial liquidation of a corporation.

Transfer by Inheritance
100. A taxable gain or deductible loss results from the transfer of property of a decedent to the executor or administrator of an estate, or to the heirs or beneficiaries.

Constructive Sale
101. If you enter into a short sale of the same or substantially identical property, you are treated as having made a constructive sale of an appreciated financial position.

Appreciated Financial Position
102. An appreciated financial position includes any interest in stock if disposing of the interest would result in a gain.

Section 1256 Contracts
Marked to Market Rules
103. A section 1256 contract that you held at the end of the tax year will generally be treated as sold at its fair market value on the last business day of the tax year.

Traders in Section 1256 Contracts
104. The fact that an individual is actively engaged in dealing or trading in section 1256 contracts is a consideration in determining whether a loss would be ordinary or capital loss.

Hedging Transactions
105. The marked to market rules do not apply to hedging transactions (non-syndicates) if you entered into the transaction to reduce risk in the normal course of your business, gain or loss is treated as ordinary income or loss, and you clearly identified the transaction as hedging before close of day when the transaction was entered.

Cost Basis
Unstated Interest
106. If you buy property under a deferred-payment plan that charges no interest, you must subtract any amount determined to be interest from your cost to find your basis.

Basis Other Than Cost
Property Received in Nontaxable Trades
107. If you have a nontaxable trade, the basis of the new property is its fair market value at the time of the trade.

Property Received as a Gift
108. Jenny received a gift of investment property with an adjusted basis of $40,000 at the time of the gift. Fair market value at the time of the gift is $20,000. Jenny later sold the property for $25,000.

109. In the current year, Melanie received a gift of property. At the time of the gift, the property had a fair market value of $250,000 and an adjusted basis to the donor of $150,000. The amount of the gift for gift tax purposes was $240,000 ($250,000 less $10,000 annual exclusion), and donor paid a gift tax of $55,200. Melanie's tax basis in the property is:

Property Received as Inheritance
110. The basis in inherited property is generally the fair market value on the date of decedent's death.

Stocks and Bonds
111. If you buy and sell securities at various times n varying quantities and you cannot adequately identify the shares you sell, the basis of the securities you sell is the average price per share.

Mutual Fund Load Charges
112. Your cost basis in mutual fund shares includes a load charge after October 3, 1989 if the load charge does not give you a reinvestment right.

Stock Dividends
New and old stock identical
113. Sarah owned 2 shares of common stock. She bought 1 for $48 and the other for $36. The corporation distributed 3 shares of common stock for each share held. She then had 8 shares of stock. What is Sarah's basis in the common stock after the distribution.

Basis of New Stock
114. Rod owned 100 shares of IPV Corp. which cost him $10 per share. Rod received 10 nontaxable stock rights that would allow him to buy 10 shares of IPV stock at $23 per share. At the time the stock rights were distributed, the stock had a fair market value of $30 per share, not including the stock rights. Each stock right had a market value of $6 or 20% of the market value of the stock. If Rod sells the stock rights, his basis for figuring gain or loss is:

Acquisition Discount on Short-term Obligations
115. You can increase the cost basis of a short-term obligation by the amount of acquisition discount you include in your income.

Nontaxable Trades
Like-Kind Exchanges
116. To be nontaxable as a like-kind exchange, you must hold for productive use in your trade or business, both the property you trade and the property you receive.

117. The exchange of a piece of machinery for a store building is an exchange of like property if both were held for investment or business.

Corporate Stocks
Corporate Reorganizations
118. In some cases, you can trade stock in one corporation for stock in another corporation without having a recognized gain or loss.

Property for Stock of a Controlled Corporation
119. If you transfer property to a corporation solely in exchange for stock in that corporation, and immediately after the trade you are in control of the corporation, you ordinarily will recognize a gain or loss.

Money or Other Property Received
120. If, in an otherwise nontaxable trade of property for corporate stock, you also receive money or other property than stock, you may have a taxable gain on the amount of money plus the fair market value of other property you receive.

Related Party Transactions
Transfers Between Spouses
121. Generally, no gain or loss is recognized on a transfer of property from an individual to a spouse.

Related Party Transactions
Like-kind Exchanges
122. If either you or the related party you exchanged property with disposes of the like property within 2 years after the trade, you must both report any gain or loss not recognized on the original trade.

Losses on Sales or Trades of Property
123. You cannot deduct a loss on the sale of property, other than a distribution in complete liquidation of a corporation, if the transaction is directly between you and your half-brother.

Property Received From a Related Party
124. Your brother sells you stock for $8,000. His cost basis is $12,000. Later you sell the stock to an unrelated party for $12,000. Your reportable gain is:

Capital or Ordinary Gain or Loss
Property held Mainly for Sale to Customers
125. Property held mainly for sale to customers is a noncapital asset.

Investment Property
Stocks, Stock Rights and Bonds
126. Stocks, stock rights and bonds are capital assets except when they are held for sale by a securities dealer.

Discounted Debt Instruments
Short-term NonGovernment Obligations
127. Gains on non-government obligations with a fixed maturity of not more than 1 year are treated as ordinary income up to the ratable share of original issue discount.

Long-Term Debt Instruments Issued After May 27, 1969
128. If you sell before maturity, a long-term corporate debt instrument issued after May 27, 1969, your gain is ordinary income if at the time the instrument was originally issued the issuer agreed in writing to redeem before maturity.

Market Discount Bonds
129. For market discount bonds issued after July 19, 1984, you must report gain as capital gain up to the instruments accrued market discount, if the debt instrument has market discount and you did not choose to include the discount in income as it accrued.

Conversion Transactions
130. Generally, all or part of a gain on a conversion transaction is treated as ordinary income.

Commodity Futures
131. Futures transactions that are not hedging transactions generally produce ordinary gain or loss.

Losses on Section 1244 (Small Business) Stock
132. A loss on the sale of small business stock can be deducted as ordinary loss rather than as a capital loss.

Ordinary Loss Limit
133. On a joint return, the loss on Section 1244 (small business) stock that you can deduct as ordinary loss is limited to $50,000 if only one spouse has this type of loss.

Holding Period
Long-term or short-term
134. If you hold investment property 1 year or less, any capital gain or loss is a short-term gain or loss.

Securities Traded on an Established Market
135. Your holding period for securities traded on an established market, begins the day after the settlement date.

Qualified Small Business Stock
136. The holding period for stock acquired in a tax-free rollover of gain from sale of qualified small business stock includes the period the old stock was held.

Nonbusiness Bad Debts
137. Nonbusiness bad debts are deductible as short-term capital losses.

Short Sales
138. If property sold short becomes substantially worthless, you must recognize gain as if the short sale were closed when the property became substantially worthless.

Short-term or Long-term
Capital Gain or Loss
139. As a general rule, the amount of time you actually hold property in a short sale determines whether you have short-term or long-term gain or loss.

Special Rules for Gains and Holding Periods
140. If you held substantially identical property for 1 year or less on the date of a short sale, your gain, if any, when you close the short sale is a short-term capital gain.

Special Rules for Treatment of Short Sale Losses
141. If you held substantially identical property for more than 1 year on the date of a short sale, any loss on the short sale is a short-term capital loss.

Wash Sales
142. Jenny buys 1,000 shares of Fairview stock for $10,000. She sells these shares for $7,500 and within one week from the sale, she acquires 1,000 shares of Fairview stock for $8,000. The amount Jenny can deduct for her sale of Fairview stock is

Options
143. Edward purchased an option to buy 5,000 shares of Microsoft stock as a personal investment. The stock increased in value and Edward sold the option for more than he paid for it. Edward's gain is

Calls and Puts
144. If you exercise a put, the amount realized on the sale of the underlying stock is reduced by the cost of the put to figure your gain or loss.

Writers of Calls and Puts
145. If you write a call, you must include the amount you receive for writing it in your income at the time of receipt.

146. If your obligation as writer of a call or put expires, the amount you received for writing it is a long-term capital gain.

Straddles
147. A straddle may consist of a call option and a put option written at the same time on the same number of shares of a security, with the same exercise price and period.

Loss Deferral Rules
148. On April 25, of the current year Barry entered into a straddle. On December 15, of the current year, Barry closed one position of the straddle for a loss of $5,000. On December 31, of the current year, the end of Barry's tax year, he had an unrecognized gain of $3,500 in the offsetting open position. Assuming Barry's straddle does not fall within exceptions for identified straddles, qualified covered call options, hedging transactions or section 1256 contracts, Barry can take a loss on his current year tax return of

Coordination of Loss Deferral Rules and Wash Sale Rules
149. You can not deduct a loss on disposition of shares of stock that make up positions of a straddle if, within a period beginning 30 days before the date of that disposition and ending 30 days after that date, you acquired substantially identical stock.

150. On December 10, of the current year, Cindy (a non-dealer in securities) bought Intel stock and an offsetting put option. On December 25, of the current year, Cindy sold the stock for a $2,000 loss and there was $2,000 of unrealized gain in the put option. By December 30, of the current year the value of the put option had declined, eliminating all unrealized gain in that position. On December 30, of the current year Cindy purchased the same number of Intel shares she sold on December 25. Cindy can deduct the loss of $2,000 from her December 25 sale of Intel stock on her current year tax return.

Successor Position
151. On December 3, of the current year you entered into offsetting long and short positions. On December 15, of the current year you disposed of the short position for a $1,000 loss. At year end, you have unrecognized gain of $600 in the offsetting long position. How much of the loss is deductible in the current year.

Holding Period and Loss Treatment Rules
152. The date you no longer hold an offsetting position (date on which a straddle ends) is when the holding period of a position in a straddle generally begins, unless the position is:

Mixed Straddles
153. A mixed straddle is a straddle in which none of the positions are a section 1256 contract.

Rollover of Gain From
Publicly Traded Securities
154. To qualify for tax-free rollover of certain gains from the sale of publicly traded securities you must meet which of the following tests.

155. There is no annual limit on the amount of tax-free rollover of certain gains from the sale of publicly traded securities.

Sales of Small Business Stock
156. You may be able to exclude part of the gain from your income from the sale of qualified small business stock.

Qualified Small Business Stock
157. To qualify for tax-free rollover of and exclusion, qualified small business stock must:

158. Qualified small business stock eligible for tax-free rollover or exclusion of gain can be stock in a corporation with total gross assets of $49 million.

Active Business Test
159. The "active business test" to qualify for special rollover or exclusion of gain treatment from sale of small business stock requires that the small business used at least 80% of its assets in the active conduct of a qualified trade or business.

Rollover of Gain
160. To qualify for tax-free rollover of capital gain from the sale of qualified small business stock held more than 6 months, you must buy the replacement stock within 60 days from the date of sale.

Section 1202 Exclusion
161. You will have to pay tax on only one-half of your gain from the sale of qualified small business stock held more than 5 years.

Reporting Capital Gains and Losses
162. Proceeds from the sale of stocks, bonds and other securities are reported on Schedule D (Form 1040).

Form 1099-S Transactions
163. It is lawful for any real estate reporting person to separately charge you for complying with the requirement to file Form 1099-S.

Capital Losses
164. If your capital losses are more than your capital gains, the maximum net capital loss you can use to reduce your annual income dollar for dollar is $3,000 ($1,500 if your are married and file a separate return).

Capital Loss Carryover
165. Long term capital losses carryover must be used before short-term loss carryover.

Capital Gain Tax Rates
166. The maximum capital gain rate does not apply if it is higher than your regular tax rate.

Gain on qualified small business stock

167. If you realized a gain from qualified small business stock that you held more than 5 years, you generally can exclude one-half of your gain from your income.

Special Rules for Traders in Securities

How To Report

Self-employment tax
168. Gains and losses from selling securities as part of a trading business are not subject to self-employment tax.

Course Evaluation
169. Indicate your professional designation.

170. Indicate years professional experience in the course subject matter.

171. Did the program meet your learning objectives?

172. Did the program materials contribute to the achievement of your learning objectives?

173. Did you find the program content relevant and timely?

174. Was the difficulty of the questions:

175. Was the indicated prerequisites (if any) for the program appropriate?

176. Do you plan to use additional courses from CPE Accounting & Tax Institute.

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