Series 66: Chapter 5 Practice Questions

Taken from our Series 66 Online Guide

Chapter 5 Practice Questions

  1. 1. On the zombie planet Dexos431, in a galaxy not far away, the planetary government lowers the tax rate as incomes rise. Economists call this a:
  2. A. Regressive tax system
  3. B. Progressive tax system
  4. C. Alternative minimum tax system
  5. D. Transfer tax system
  6. 2. All of the following would be considered ordinary income except:
  7. A. Wages earned at a job
  8. B. Income earned from one’s business
  9. C. Bonus received from an employer
  10. D. Profits distributed to shareholders of a C corporation
  11. 3. Which of the following would affect the tax basis of a security?
  12. I. Commissions paid to buy the security
  13. II. Commissions paid to sell the security
  14. III. Stock splits
  15. IV. Receiving the security as a gift from a living relative
  16. A. I only
  17. B. I and II
  18. C. I and III
  19. D. II and IV
  20. 4. A taxpayer with a total excess capital loss of $10,000 may:
  21. A. Deduct $3,000 against their ordinary income
  22. B. Deduct $10,000 against their ordinary income
  23. C. Deduct against ordinary income if their holding period was more than 12 months
  24. D. Not deduct anything
  25. 5. All of the following are true of a wash sale except:
  26. A. It adds the loss to the new basis.
  27. B. It is applied to sales and repurchases that happen within 30 days of the trade date.
  28. C. The IRS does not allow wash sales.
  29. D. Wash sales do not apply to sales where a gain was made.
  30. 6. Which of the following are true of the alternative minimum tax?
  31. I. Taxpayers may choose which system to file under.
  32. II. All taxpayers must calculate their AMT.
  33. III. The AMT is designed to minimize a taxpayer’s liability.
  34. IV. Certain deductions are excluded from the AMT calculation.
  35. A. I and III
  36. B. II and IV
  37. C. I and IV
  38. D. II and III
  39. 7. Income earned by an estate after the person’s death is:
  40. A. Not taxed
  41. B. Taxed at the beneficiary’s rate
  42. C. Taxed at the executor’s rate
  43. D. Taxed at t

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