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28 Nov 2019

Capital Gains Taxes. What is the difference in tax rates on long-term versus short-term capital gains?

Income from interest payments, coupon payments, and capital gains on assets held for less than a year are: (Select the best answer below.)

A. taxed at a higher rate than ordinary income. These are short-term capital gains.

B. taxed as ordinary income. These are long-term capital gains.

C. taxed as ordinary income. These are short-term capital gains.

D. taxed at a lower rate than ordinary income. These are short-term capital gains.

Capital gains resulting from the sale of investments held more than one year​ are:  ​(Select the best answer​ below.)

A. short-term capital gains and are taxed at a lower rate than ordinary income for most investors.

B. ​long-term capital gains and are taxed at a lower rate than ordinary income for most investors.

C. long-term capital gains and are taxed at a higher rate than ordinary income for most investors.

D. ​long-term capital gains and are taxed as ordinary income for most investors.

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Jean Keeling
Jean KeelingLv2
20 Apr 2019
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Related questions

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?

a.

capital assets that are held for more than one year are treated as long-term
b.

no distinction is made between capital losses and ordinary losses
c.

with few exceptions, the maximum capital gains tax rate is 15%

the benefit of holding a capital asset long enough to garner long-term capital gain treatment must be weighed against the financial risk associated with a possible decline in value during the holding period

3. Which of the following statements about the taxation of dividends is correct?

a.

all dividends are taxed at the same rate as applicable to capital gains
b.

dividends paid by credit unions and mutual insurance companies qualify for the lower tax rate
c.

qualifying dividends are taxed at a maximum 15% rate

d. there is no tax benefit to changing some of an individual's funds from a lower-yielding fixed income investment into a dividend-paying stock

4. Which of the following is an advantage of making an IRC Section 83(b) election with respect to restricted stock?

a.

an 83(b) election can be made any time within the tax year of the transfer of shares from the company to the employee
b.

if the stock is forfeited, the compensation recognized and the taxes paid are deductible as losses
c.

any future appreciation would be taxed as capital gain instead of taxable compensation

d. the employee does not receive any cash at the time of the stock award to pay the tax on the compensation recognized under the election

5.The maximum alternative minimum tax rate for individuals is:

a.

less than the maximum regular federal income tax rate for individuals
b.

equal to the maximum regular federal income tax rate for individuals
c.

greater than the maximum regular federal income tax rate for individuals

d. going to decrease each year by 1% until it reaches 20% in 2010

6. How is alternative minimum taxable income (AMTI) for individuals computed?

a.

AMTI = taxable income + adjustments + preferences - exemptions
b.

AMTI = taxable income - adjustments + preferences - exemptions
c.

AMTI = taxable income +/- adjustments + preferences - exemption
.

d. AMTI = taxable income +/- adjustments - preferences - exemptions

7. Which of the following statements regarding the calculation of alternative minimum taxable income (AMTI) for corporations versus the calculation of AMTI for individuals is accurate?

a.

AMTI is calculated the same for both corporations and individuals
b.

an additional step is required for corporations based on their adjusted current earnings
c.

the exemption amount for corporations is not subject to phaseout to phaseout while the exemption amounts for individuals are
d.

thethere is no adjustments to taxable income for corporations, only preferences

Conroy Consulting Corporation (CCC) has been growing at a rate of 14% per year in recent years. This same non-constant growth rate is expected to last for another 2 years (g0,1 = g1,2 = 14%). If D0= $1.70, rs= 9% and gL = 6%, then what is CCC's stock worth today? Round your answer to the nearest cent. Do not round your intermediate computations. $ What is its expected dividend yield at this time? Round the answer to two decimal places. Do not round your intermediate computations. % What is its capital gains yields at this time? Round the answer to two decimal places. Do not round your intermediate computations. % Now assume that CCC's period of supernormal growth is to last another 5 years rather than 2 years (g0,1 = g1,2 = g2,3 = g3,4 = g4,5 = 14%). How would this affect its price, dividend yield, and capital gains yield? I.Due to the longer period of supernormal growth, the value of the stock will be lower for each year. Although the total return will remain the same, the distribution between dividend yield and capital gains yield will differ for the duration of the supernormal growth period. II.Due to the longer period of supernormal growth, the value of the stock will be higher for each year. The total return as well as the distribution between dividend yield and capital gains yield will differ for the duration of the supernormal growth period. III.Due to the longer period of supernormal growth, the value of the stock will be higher for each year. The total return as well as the distribution between dividend yield and capital gains yield will remain the same for the duration of the supernormal growth period. IV.Due to the longer period of supernormal growth, the value of the stock will be lower for each year. The total return as well as the distribution between dividend yield and capital gains yield will differ for the duration of the supernormal growth period. V.Due to the longer period of supernormal growth, the value of the stock will be higher for each year. Although the total return will remain the same, the distribution between dividend yield and capital gains yield will differ for the duration of the supernormal growth period. What will CCC's dividend yield and capital gains yield be once its period of supernormal growth ends? (Hint: These values will be the same regardless of whether you examine the case of 2 or 5 years of supernormal growth, and the calculations are very easy.) Round the answers to two decimal places. Do not round your intermediate computations. Dividend yield % Capital gains yield % Of what interest to investors is the relationship over time between dividend yield and capital gains yield? I.It is of no interest to investors whether they receive dividend income or capital gains income, since both types of income are always taxed at the same rate. II.It is of no interest to investors whether they receive dividend income or capital gains income, since taxes on both types of income must be paid in the current year. III.It is of no interest to investors whether they receive dividend income or capital gains income, since taxes on both types of income can be delayed until the stock is sold. IV.Some investors need cash dividends, while others would prefer growth. Also, investors must pay taxes each year on the dividends received during the year, while taxes on the capital gain can be delayed until the gain is actually realized. V.Some investors need cash dividends, while others would prefer growth. Also, investors must pay taxes each year on the capital gain during the year, while taxes on the dividends can be delayed until the stock is sold.

Question 11

Advantages of mutual funds include

A.

professional management.
B.

all of these.
C.

liquidity.
D.

diversification.

Question 12

Which of the following types of investment companies operates much like an index fund?

A.

exchange-traded fund
B.

unit investment trust
C.

closed-end fund
D.

REIT

Question 13

A common stock fund that invests in only one industry is called a(n) ____ fund.

A.

maximum capital gains
B.

growth and income
C.

index
D.

sector

Question 14

Mutual funds that charge a load do so to compensate

A.

fund managers.
B.

brokers.
C.

shareholders.
D.

the SEC.

Question 15

Your first task in selecting a mutual fund is to

A.

review your investment policy.
B.

locate sources of comparative performance data.
C.

eliminate funds inappropriate for your investment goals.
D.

screen and compare funds that meet your investment criteria.

Question 16

Taxes on annual earnings from mutual funds can be avoided

A.

while those amounts are kept in an IRS-qualified retirement account.
B.

as long as the mutual shares are not sold.
C.

while those amounts are kept in an IRS-qualified retirement account and if those earnings are interest from municipal bonds.
D.

if those earnings are interest from municipal bonds.

Question 17

Mutual funds permit automatic income reinvestment of

A.

ordinary income dividend distribution.
B.

none of these.
C.

both ordinary income dividend distributions and capital gains distributions.
D.

capital gains distribution.

Question 18

The type of mutual fund that is not actively managed is called a(n) ____ fund.

A.

emerging market
B.

money market
C.

index
D.

sector

Question 19

A mutual fund that does not assess a sales charge at the time of the investment purchase is called a ____ fund.

A.

back-end load
B.

front-end load
C.

low-load
D.

no-load

Question 20

Open-end mutual funds

A.

make up about 75 percent of all mutual funds.
B.

are sold only through brokers.
C.

are sold at their current net asset value.
D.

are sold to other investors on a secondary market.

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