B. Acy Bachelor of Accountancy Tax Accounting (REG) 2 — Questions and Answers
Question 1: Under US tax law, what is the long-term capital gains tax rate for taxpayers in the 22% ordinary income bracket?
- 0%
- 10%
- 15% (Correct answer)
- 20%
Correct answer: 15%
Taxpayers in the 22% to 35% ordinary income brackets pay a 15% rate on long-term capital gains.
Question 2: Which of the following items is included in a taxpayer's gross income?
- Gifts received
- Life insurance proceeds paid on death
- Wages from employment (Correct answer)
- Child support payments received
Correct answer: Wages from employment
Wages are always included in gross income under IRC Section 61, while the other items are specifically excluded.
Question 3: The alternative minimum tax (AMT) was primarily designed to ensure that:
- Small businesses pay a minimum tax
- High-income taxpayers pay at least a minimum amount of tax (Correct answer)
- All taxpayers pay the same rate
- Corporate taxes are equalized
Correct answer: High-income taxpayers pay at least a minimum amount of tax
AMT ensures that high-income taxpayers who use deductions and credits cannot reduce their tax liability to zero.
Question 4: In a like-kind exchange under IRC Section 1031, which of the following is true?
- All gains are permanently excluded
- Gain is recognized only to the extent of boot received (Correct answer)
- The exchange must involve personal property
- Cash always triggers full gain recognition
Correct answer: Gain is recognized only to the extent of boot received
In a Section 1031 exchange, gain is recognized only to the extent of boot (cash or non-like-kind property) received.
Question 5: Which form do sole proprietors use to report business income and expenses on their individual tax return?
- Schedule C (Correct answer)
- Schedule E
- Schedule F
- Form 1065
Correct answer: Schedule C
Sole proprietors report business profit or loss on Schedule C, which flows to Form 1040.
Question 6: What is the self-employment tax rate applied to net self-employment income up to the Social Security wage base?
- 7.65%
- 12.4%
- 15.3% (Correct answer)
- 13.3%
Correct answer: 15.3%
The self-employment tax rate is 15.3%, comprising 12.4% for Social Security and 2.9% for Medicare.
B. Acy Bachelor of Accountancy Tax Accounting (REG) 2
Under US tax law, what is the long-term capital gains tax rate for taxpayers in the 22% ordinary income bracket?