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Tax Law & Regulations Flashcards

7 cards from real CIMA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

Read the first 7 Tax Law & Regulations flashcards as text

  1. Under the passive activity loss rules (IRC Section 469), which of the following taxpayers may deduct up to $25,000 of rental real estate losses against nonpassive income?

    Answer: An active participant with MAGI under $100,000

    The $25,000 rental loss allowance is available to active participants with MAGI below $100,000 and phases out ratably between $100,000 and $150,000.

  2. An investor sells a collectible held for more than one year at a gain. The maximum federal capital gains rate on this gain is:

    Answer: 28%

    Long-term gains on collectibles (coins, art, antiques) are taxed at a maximum rate of 28% under IRC Section 1(h), higher than the 20% rate for most long-term capital assets.

  3. Which of the following describes the 'kiddie tax' under IRC Section 1(g)?

    Answer: Unearned income of children under age 19 (or full-time students under 24) above a threshold is taxed at the parent's rate

    The kiddie tax taxes a child's net unearned income above the threshold ($2,500 in 2024) at the parent's marginal tax rate to prevent income-shifting strategies.

  4. A donor contributes appreciated stock held more than one year to a public charity. The deduction is limited to:

    Answer: 30% of AGI with a 5-year carryforward

    Cash gifts to public charities are limited to 60% of AGI, but gifts of long-term appreciated capital gain property are limited to 30% of AGI with a 5-year carryforward.

  5. Under the SECURE 2.0 Act, the required beginning date for RMDs was changed. For individuals born in 1951–1959, the RMD age is:

    Answer: 73

    SECURE 2.0 (2022) moved the RMD starting age to 73 for those born between 1951 and 1959, and to 75 for those born in 1960 or later.

  6. Which type of municipal bond interest is generally excluded from federal gross income under IRC Section 103?

    Answer: General obligation bonds issued by states and municipalities

    Interest on state and local government general obligation bonds is federally tax-exempt under IRC Section 103, making them attractive for high-income investors.

  7. A taxpayer has a $50,000 suspended passive loss from a rental property. The property is sold in a fully taxable transaction. The suspended loss:

    Answer: Becomes fully deductible in the year of disposition

    Upon a fully taxable disposition of a passive activity, any suspended losses from that activity are released and become fully deductible in the year of sale.