CTC Investment Analysis 5

Question 1

A client holds a traditional IRA invested in a master limited partnership. Above what amount of unrelated business taxable income must the IRA file Form 990-T?

Accepted Answer

$1,000

Answer

An IRA with $1,000 or more of gross UBTI must file Form 990-T and may owe tax inside the account.

Question 2

For an ESPP sale to be a qualifying disposition, the shares must be held:

Accepted Answer

At least 2 years from the grant date and 1 year from the purchase date

Answer

Qualifying ESPP dispositions require more than 2 years from grant and more than 1 year from purchase.

Question 3

When an employee exercises incentive stock options and holds the shares, what tax issue commonly arises in the year of exercise?

Accepted Answer

The bargain element is an AMT adjustment

Answer

The ISO spread at exercise is not regular taxable income but is an adjustment for alternative minimum tax purposes.

Question 4

With Net Unrealized Appreciation, how is the NUA portion of employer stock taxed when it is sold after a qualifying lump-sum distribution?

Accepted Answer

As long-term capital gain regardless of holding period after distribution

Answer

Only the plan's cost basis is ordinary income at distribution, while the NUA is always taxed as long-term capital gain when sold.

Question 5

A client donates publicly traded stock held for three years to a public charity. What is generally the deduction amount and AGI limit?

Accepted Answer

FMV, limited to 30% of AGI

Answer

Long-term appreciated capital gain property given to a public charity is deductible at FMV up to 30% of AGI, avoiding tax on the appreciation.

CTC - Certified Tax Coach Practice Test

CTC - Certified Tax Coach Practice Test

CTC Investment Analysis 5