Choose wisely. There is only one correct answer to each question.
0%
Keep studying!
Review your answers below to learn more.
1.
If you have a capital loss of $4,000 in one year and you deduct the limit of $3,000 on your income tax return, what happens to the leftover $1,000?
You carry it over to the next year. The IRS lets you carry over any undeducted loss into subsequent years.
2.
The idea behind creating a class of "qualified dividends" is to prevent _______.
Double taxation. The idea behind making some dividends qualified is to reduce double taxation -- that is, taxation of the same profits at both the corporate and shareholder levels.
3.
What does "stepped-up basis" mean?
An investment's basis changes to that of the market value on the day of your death. Stepped-up basis is most commonly known in estate planning, where if you die, the basis will step up to that of the day of your death. Whoever inherits the stock will thus enjoy less tax on it.
4.
Which type of tax-advantaged account offers the potential for tax-exempt distributions?
A Roth IRA. A Roth IRA offers tax-free distributions, as long as certain rules are met. The downside is that Roth IRAs must be funded with after-tax dollars.
5.
When does your five-taxable-year period for Roth IRAs start?
On Jan. 1 of the tax year when you make your first contribution or conversion to a Roth IRA.
