Business Administration - Accounting & Financial Planning FIN401 Lecture Notes - Lecture 17: Day Trader, Jan Rezek, Financial Institution
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Which of the following statements is correct with regard tobusiness tax calculation?
When determining a corporationâs taxable income, all of theexpense items are 100% deductible. | ||
Net operating losses can be carried back to the past three yearsand carried forward to the next 15 years. | ||
Alternative Minimum Tax system applies to small companies andlow-income taxpayers. | ||
Dividend and long-term capital gains usually are levied at aflat tax rate which is comparatively high. |
Elaine Case (single with no dependents) has the following transactions in 2016: AGI (exclusive of capital gains and losses) $240,000 Long-term capital gain 22,000 Long-term capital loss (8,000) Short-term capital gain 19,000 Short-term capital loss (23,000)
a. Elaine has a net long-term capital gain of $ 14,000 and a net short-term capital loss of $ 4,000 . As a result, she has an overall net capital gain of $ 10,000
b. Complete the letter to Elaine describing how the net capital gain or loss will be treated on her tax return. Assume Elaine's income from other sources puts her in the 39.6% bracket. If required, round your answer to one decimal place.
Hoffman, Young, Raabe, Maloney, & Nellen, CPAs 5191 Natorp Boulevard< Mason, OH 45040 |
March 17, 2017 |
Ms. Elaine Case 300 Ireland Avenue Shepherdstown, WV 25443 |
Dear Ms. Case: |
The purpose of this letter is to discuss the result of your stock transactions for 2016. You had $14000 of long-term capital gains and $4000 of short-term capital losses. Subtracting the $?? of losses from the $ ??? of gains results in a $??? net long-term capital gain. |
The $??? net long-term capital gain and the details of your stock transactions will be reported on the Schedule D attached to your Form 1040. The $ ??? net capital gain qualifies for the alternative tax on capital gains and will be taxed at a ??? % rate rather than at your marginal tax rate of ??? %. |
Thank you for the opportunity to be of service. Please call me if you have additional questions. |
Sincerely, |
Michelle Brown, CPA Partner |
1.Which of the following statements about conversion of income is correct?
a. | converting ordinary income into capital gain is a beneficial tax planning strategy | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
b. | converting capital gain income into ordinary income is a beneficial tax planning strategy | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
c. | converting qualifying dividends into interest income is a beneficial tax planning strategy | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
d. | holding assets that will generate a capital gain inside a retirement plan is a beneficial tax planning strategy 2. Which of the following statements is NOT a true statement regarding long-term capital assets?
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