CIMA Tax Law & Regulations 2

Question 1

Under IRC Section 1411, the Net Investment Income Tax (NIIT) applies at what rate for high-income taxpayers?

Accepted Answer

3.8%

Answer

The NIIT imposes a 3.8% surtax on the lesser of net investment income or the amount by which MAGI exceeds the threshold ($200,000 single/$250,000 MFJ).

Question 2

A taxpayer sells a partnership interest held for 3 years. The portion attributable to 'hot assets' under IRC Section 751 is taxed as:

Accepted Answer

Ordinary income

Answer

IRC Section 751 requires that gain attributable to unrealized receivables and inventory items (hot assets) be recharacterized as ordinary income regardless of holding period.

Question 3

Which type of trust is included in the grantor's taxable estate at death because the grantor retains an interest?

Accepted Answer

Qualified Personal Residence Trust

Answer

A QPRT is included in the grantor's estate if the grantor dies during the trust term because IRC Section 2036 pulls back assets where the grantor retains a life interest.

Question 4

The wash-sale rule under IRC Section 1091 disallows a loss when substantially identical securities are purchased within how many days before or after the sale?

Accepted Answer

30 days

Answer

The wash-sale rule disallows a realized loss if the taxpayer buys substantially identical securities within 30 days before or after the loss sale (a 61-day window total).

Question 5

For purposes of the alternative minimum tax (AMT), which preference item must be added back to regular taxable income?

Accepted Answer

Municipal bond interest from private activity bonds

Answer

Interest on private activity bonds is a tax preference item that must be included in AMTI, unlike interest on general obligation municipal bonds.

(CIMA) Certified Investment Management Analyst Practice Test

(CIMA) Certified Investment Management Analyst Practice Test

CIMA Tax Law & Regulations 2