Unit 6: Tax Calc
If a municipal bond is issued at par and later purchased for 97 plus accrued interest of $32, what is the purchaser's cost basis?
$970
Municipal bonds would be considered the most suitable for which of the following customer scenarios?
An investor in a high-income tax bracket wanting income for their investment account
If an investor is in the highest federal income tax bracket and is subject to the alternative minimum tax (AMT), which of the following securities should an agent recommend?
General obligation (GO) bond
The alternative minimum tax (AMT) is designed to present an alternative tax computation that disallows deductions for certain tax preference items and includes certain nontaxable income. Which of the following is not a tax preference item?
Interest received on corporate bonds
Which of the following is federally tax exempt for a corporation?
Municipal bond interest
A 3% bond with 20 years to maturity is being issued by a syndicate with a reoffering yield of 4%. What is the term used to describe this bond?
Original issue discount
Which of the following securities would have a Moody's MIG rating?
TANs
An investor buys a municipal bond at a discount. The bond carries a 3% coupon. At maturity, the bond will pay the face amount to the holder of the bond on the maturity date. In the meantime, the IRS requires accretion of the discount. That accretion is tax-exempt income when the bond is
an original issue discount bond
Alternative minimum tax (AMT)
is assessed against high annual income earners and disallows some deductions and exemptions used to calculate adjusted gross income
A 27-year-old client is in the lowest tax bracket and seeks an aggressive long-term growth investment. If his investment adviser representative recommends a high-rated general obligation municipal bond, the investment adviser representative (IAR) has
made an unsuitable recommendation based on the client's needs and objectives
Several years ago, one of your customers bought an original issue discount (OID) municipal bond at $960. The bond has now matured. For federal income tax purposes, the discount is
tax free
Investors who are subject to the alternative minimum tax (AMT) will lose the tax benefits normally associated with
tax preference items.
A customer buys a municipal bond in the secondary market at 96 that has four years to maturity. Two years later, the customer sells the bond at 99. The tax consequences of this investment are
two points of ordinary income and one point of capital gain.
Interest received on a California general obligation bond purchased by a San Francisco resident is exempt from
state and federal income taxes