Question 1

Which of the following best describes phantom income?

Options :

A : income from deductions and tax credits

B : the non-taxable portion of a distribution

C : income received but not reported

D : income reported but not received

Answer: D

Question 2

On which of the following is depreciation permitted?

Options :

A : rental property whose value is declining

B : residential property not used for business

C : property whose maintenance exceeds the investment credit

D : equipment subject to recapture

Answer: B

Question 3

How often must Investment companies issue financial statements to shareholders?

Options :

A : monthly

B : quarterly

C : semi-annually

D : annually

Answer: C

Question 4

In June, Bubba bought 100 shares of XYZ at $35. In November, he bought a listed put in XYZ with a $35 strike price and a July expiration for a premium of $600. In April, Bubba exercises the put option and uses his stock for deliveryWhat is his resulting tax consequence?

Options :

A : a $600 capital loss

B : neither profit nor loss

C : cannot be determined without knowing the market price of XYZ upon exercise

D : this is a wash sale and cannot be included in the investor’s tax calculations

Answer: A

Question 5

A leveraged company is best described as one that has a small portion of its capitalization represented by:

Options :

A : common stock

B : preferred stock

C : debentures

D : convertible bonds

Answer: A

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