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.
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.
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.
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.
5.
If you buy a stock for $20 and sell it for $30, the $10 gain is a form of ordinary income.
False. The $10 gain is a capital gain, and may be taxed differently from ordinary income; it depends on how long you held the stock.
