Question 36 (2 points) Mr. Erske plans to invest $100,000 in one of the following three projects that have the same level of risk: Project 1 will generate a 9.0% before-tax return and be taxed at his 32% marginal tax rate. Project 2 will generate a 7.0 % before-tax return and be taxed at a 15% preferential rate. Project 3 will generate a 6.5% before-tax return and is tax-exempt. Which investment should Mr. Erske select? Project 2 Project 3 Any of the three projects. Project 1 Mr. Crumb owns several fully taxable corporate bonds and received $12,500 of taxable interest during the current tax year. When Mr. Crumb receives checks for this interest, he always endorses the back of the checks and mails them to his college-age daughter, who cashes the checks and deposits the funds in her personal bank account. Which of the following statements is TRUE regarding the taxation of this interest income? Mr. Crumb must report the $12,500 of income on his own tax return because he owns the bonds. Mr. Crumb and his daughter may decide which one of them will report the $12,500 of income on his or her tax return. It is illegal for Mr. Crumb to transfer the checks to his daughter, so he will be subject to a penalty The daughter must report the $12,500 of income on her own tax return because she kept the cash. M&M sold a business asset for $100,000 with the buyer paying $30,000 in cash and giving M&M a one-year note for the $70,000 balance of the purchase price. M&M can use the installment method to defer recognizing 70% of the realized gain until the next tax year. True False Select each of the items below that are depreciable or amortizable for federal income tax purposes. You may select as many items as you like, but do not select an item if a related depreciation or amortization deduction is not allowed. Land used in a trade or business Business start-up costs Inventory | Personal residence Rental apartment building Question 36 (2 points) Mr. Erske plans to invest $100,000 in one of the following three projects that have the same level of risk: Project 1 will generate a 9.0% before-tax return and be taxed at his 32% marginal tax rate. Project 2 will generate a 7.0 % before-tax return and be taxed at a 15% preferential rate. Project 3 will generate a 6.5% before-tax return and is tax-exempt. Which investment should Mr. Erske select? Project 2 Project 3 Any of the three projects. Project 1 Mr. Crumb owns several fully taxable corporate bonds and received $12,500 of taxable interest during the current tax year. When Mr. Crumb receives checks for this interest, he always endorses the back of the checks and mails them to his college-age daughter, who cashes the checks and deposits the funds in her personal bank account. Which of the following statements is TRUE regarding the taxation of this interest income? Mr. Crumb must report the $12,500 of income on his own tax return because he owns the bonds. Mr. Crumb and his daughter may decide which one of them will report the $12,500 of income on his or her tax return. It is illegal for Mr. Crumb to transfer the checks to his daughter, so he will be subject to a penalty The daughter must report the $12,500 of income on her own tax return because she kept the cash. M&M sold a business asset for $100,000 with the buyer paying $30,000 in cash and giving M&M a one-year note for the $70,000 balance of the purchase price. M&M can use the installment method to defer recognizing 70% of the realized gain until the next tax year. True False Select each of the items below that are depreciable or amortizable for federal income tax purposes. You may select as many items as you like, but do not select an item if a related depreciation or amortization deduction is not allowed. Land used in a trade or business Business start-up costs Inventory | Personal residence Rental apartment building
