Question

true or false

1-in 2015 taxpayers pay an additional 3.8% tax on their net investment income ?

2-gross income does not include social security benefits received by the taxpayers ?

3-return of capital distribution generally are included in the recipient gross income ?

4- payment for child support are not included in gross income of the recipient custodial parent ?

5- a taxpayer who receives payment for mowing lawns must include them in gross income ?

6- the buyer of a taxable bond with accrued interest at the purchase date includes the purchase accrued interest in gross income

7- taxpayers holding bonds with an original issue discount must include the discount in gross income ratably (equally each year) over the life of the bonds ?

8- for tax purposes , borrowers must impute and report interest income when the interest rate on a loan is below the market rate ( the loan has a low stated rate of interest)

9-full time student between the ages of 19 and 23 are subject to the kiddie tax

10-an accrual basis taxpayers receives and advanced payment for services to be performed over the next three years . the taxpayers reports the payments in gross income over the years as the services are rendered over the next three years

11- reduced tax rates apply to dividends known as "qualified dividends" ?

Answer 1

1) true

The Net Investment Income Tax is imposed by section 1411 of the Internal Revenue Code. The NIIT applies at a rate of 3.8% to certain net investment income of individuals, estates and trusts that have income above the statutory threshold amounts.

2) true

Since the 1980s, some recipients of these benefits who meet certain income levels have been required to pay taxes on the money they receive. While Social Securitybenefits are not counted as part of gross income, they are included in combinedincome, which the IRS uses to determine if benefits are taxable

3)False

Return of capital is a payment received from an investment that is not considered a taxable event and is not taxed as income. Instead, return of capital occurs when an investor receives a portion of his original investment, and these payments are not considered income or capital gains from the investment

4) True

child support payments willnot be deducted by the noncustodial parent(the payer) and not taxable to the custodial parent (payee). When calculating for thegross income to check if the payer and payee are qualified for filing of tax return, one mustnot include the payments received from child support

5)True

Mowing lawns is a common way for young people to make money, and the Internal Revenue Service considers it taxable income. Unless you work for a lawn care business and get a paycheck, you are operating your own business. You must report your income using IRS Schedule C, “Profit and Loss from Business (Sole Proprietorship).” You’ll probably have to complete Schedule SE, “Self-Employment Tax” as well

6)true

7) False

8)true

Below market loans other than gift or demand loans are term loans, which are restructured for tax purposes so that the excess of the loan amount over the present value of all required loan payments, that is, the loan’s original issue discount (OID), is treated as transferred from the lender to the borrower on the date of the loan. The lender and borrower recognize the interest under the OID rules over the life of the loan.

9) true

child is affected by the Kiddie Tax if their unearned income exceeds $2,100 and they are:

-Under age 18 at the end of 2017;
-Age 18 at the end of 2017, with earned incomethat is less than (or equal to) half of their support for the year; or
-Age 19-23 at the end of 2017, with earned income that is less than (or equal to) half their support, and they are full-time students.

10) False

Only payment for the current year should be reported

11)true

Qualified dividends, as defined by the United States Internal Revenue Code, are ordinarydividends that meet specific criteria to be taxed at the lower long-term capital gains tax rate rather than at higher tax rate for an individual's ordinary income. The rates onqualified dividends range from 0 to 23.8%