AWMA CORE MAIN EXAMINATION SET
QUESTIONS AND ANSWERS SURE A+
✔✔Which one of the following is NOT a tax preference or adjustment item for AMT
purposes?
A) Excess intangible drilling costs
B) Charitable contributions deduction
C) Tax-exempt interest on qualified private-activity municipal bonds issued in 2008
D) Bargain element on the exercise of an incentive stock option - ✔✔B) A charitable
contribution deduction is an allowable itemized deduction under the alternative minimum
tax. It is not a preference item or adjustment. Mod 5
✔✔Theresa is a single taxpayer. In 2020, her AGI is $235,000, including a net long-term
capital gain of $44,000. What is the amount, if any, of Medicare contribution tax that she
must pay?
A)$1,672
B) $1,330
C) $8,930
D) $0 - ✔✔B) She will pay the 3.8% Medicare contribution tax on $35,000. This is the
lesser of the net investment income ($44,000) or the AGI in excess of the threshold
, amount ($235,000 − $200,000, or $35,000). Theresa will pay a $1,330 Medicare
contribution tax (3.8% on $35,000). Mod 5
✔✔Assume that, during the current tax year, Jake has a short-term capital loss of
$9,000 from the sale of stocks. He also has a long-term capital gain from the sale of a
sports memorabilia collection of $5,500 and has unrecaptured Section 1250 income of
$14,000 from the sale of a residential rental property. Jake is in the 32% marginal
income tax bracket. What is the tax result from the capital transactions?
A) $10,500 unrecaptured Section 1250 income taxed at 25%
B) $10,500 of Section 1202 gain that is not taxed
C) $3,500 short-term capital loss carryforward and $14,000 unrecaptured Section 1250
income taxed at 25%
D) $5,000 unrecaptured Section 1250 income taxed at 25% and $5,500 collectibles gain
taxed at 28% - ✔✔A) The short-term capital loss is first used to offset the collectibles
gain of $5,500. This leaves a short-term capital loss of $3,500. This is next used to
offset the 25% gain. The $14,000 is offset by the $3,500 remaining capital loss. This
leaves $10,500 of unrecaptured Section 1250 income, taxed at a maximum 25% rate.
This is the most favorable manner of offsetting the capital losses against the capital
gains. Mod 5
✔✔Which one of the following is a correct statement regarding the wash sale rules?
A)The holding period for the new (substantially identical) securities includes the holding
period of the old security.
B)The wash sale rule applies if the taxpayer purchases substantially identical securities
within 60 days before to 60 days after the date of the sale or disposition that resulted in
a loss.
C)Basis is generally decreased by the amount of the loss that is disallowed on a wash
sale.
D)The wash sale rules do not apply to sales and investments in mutual funds. - ✔✔A)
The basis of the new security is increased by the amount of loss that was disallowed on
the wash sale. In addition, the holding period for the new securities includes the holding
period of the old security. Mod 5
✔✔Which of the following rates apply to qualified dividends that fall above the $496,600
taxable income breakpoint for a married couple filing jointly?
A)25%
B)20%
C)0%
D)15% - ✔✔B) A maximum 25% long-term capital gains rate applies to unrecaptured
Section 1250 income (the portion of the gain from the sale of realty that was attributable
to straight-line depreciation). Mod 5
QUESTIONS AND ANSWERS SURE A+
✔✔Which one of the following is NOT a tax preference or adjustment item for AMT
purposes?
A) Excess intangible drilling costs
B) Charitable contributions deduction
C) Tax-exempt interest on qualified private-activity municipal bonds issued in 2008
D) Bargain element on the exercise of an incentive stock option - ✔✔B) A charitable
contribution deduction is an allowable itemized deduction under the alternative minimum
tax. It is not a preference item or adjustment. Mod 5
✔✔Theresa is a single taxpayer. In 2020, her AGI is $235,000, including a net long-term
capital gain of $44,000. What is the amount, if any, of Medicare contribution tax that she
must pay?
A)$1,672
B) $1,330
C) $8,930
D) $0 - ✔✔B) She will pay the 3.8% Medicare contribution tax on $35,000. This is the
lesser of the net investment income ($44,000) or the AGI in excess of the threshold
, amount ($235,000 − $200,000, or $35,000). Theresa will pay a $1,330 Medicare
contribution tax (3.8% on $35,000). Mod 5
✔✔Assume that, during the current tax year, Jake has a short-term capital loss of
$9,000 from the sale of stocks. He also has a long-term capital gain from the sale of a
sports memorabilia collection of $5,500 and has unrecaptured Section 1250 income of
$14,000 from the sale of a residential rental property. Jake is in the 32% marginal
income tax bracket. What is the tax result from the capital transactions?
A) $10,500 unrecaptured Section 1250 income taxed at 25%
B) $10,500 of Section 1202 gain that is not taxed
C) $3,500 short-term capital loss carryforward and $14,000 unrecaptured Section 1250
income taxed at 25%
D) $5,000 unrecaptured Section 1250 income taxed at 25% and $5,500 collectibles gain
taxed at 28% - ✔✔A) The short-term capital loss is first used to offset the collectibles
gain of $5,500. This leaves a short-term capital loss of $3,500. This is next used to
offset the 25% gain. The $14,000 is offset by the $3,500 remaining capital loss. This
leaves $10,500 of unrecaptured Section 1250 income, taxed at a maximum 25% rate.
This is the most favorable manner of offsetting the capital losses against the capital
gains. Mod 5
✔✔Which one of the following is a correct statement regarding the wash sale rules?
A)The holding period for the new (substantially identical) securities includes the holding
period of the old security.
B)The wash sale rule applies if the taxpayer purchases substantially identical securities
within 60 days before to 60 days after the date of the sale or disposition that resulted in
a loss.
C)Basis is generally decreased by the amount of the loss that is disallowed on a wash
sale.
D)The wash sale rules do not apply to sales and investments in mutual funds. - ✔✔A)
The basis of the new security is increased by the amount of loss that was disallowed on
the wash sale. In addition, the holding period for the new securities includes the holding
period of the old security. Mod 5
✔✔Which of the following rates apply to qualified dividends that fall above the $496,600
taxable income breakpoint for a married couple filing jointly?
A)25%
B)20%
C)0%
D)15% - ✔✔B) A maximum 25% long-term capital gains rate applies to unrecaptured
Section 1250 income (the portion of the gain from the sale of realty that was attributable
to straight-line depreciation). Mod 5
