Question 1. Charles and Camille are married and file a joint return. They have m
ID: 2602689 • Letter: Q
Question
Question 1.
Charles and Camille are married and file a joint return. They have modified adjusted gross income of $245,000, which includes $25,000 of capital gain. They have no other net investment income. Charles and Camille will calculate their net investment income tax on __________.
A $0
B $25,000
c $70,000
D $245,000
A $0
B $25,000
c $70,000
D $245,000
Question 2 Which of the following persons would most likely be considered a trader? Nigel trades during the summer when he is home from college. He consults with other traders and sells the stock before going back to college at the end of the summer. Tristan trades nearly every day. He usually sells after a few days, hoping to profit from short term changes in stock prices. Ivan trades every day when he gets home from work. He spends time researching the company and holds the stock for a year or more before selling. Andre trades two or three days a week. He likes to invest in companies that pay regular dividends, although he sometimes sells after holding the stock for a few days.Explanation / Answer
Answer 1
The Net Investment Income Tax is imposed by section 1411 of the Internal Revenue Code. The NIIT applies at a rate of 3.8% to certain net investment income of individuals, estates and trusts that have income above the statutory threshold amounts.
Individuals will owe the tax if they have Net Investment Income and also have modified adjusted gross income over $250,000 in case of married couple filling a joint return.
Since, in this case Charles and Camille have modified adjusted gross income of $245,000 which is less than the threshold of $250,000, they are not supposed to pay any net investment income tax.
Charles and Camille will calculate their net investment income tax on (a) $0.
Answer 2
A trader is a person who is engaged in buying and selling of financial assets in any financial market, either for himself or onbehalf of any other person. The main difference between a trader and an investor is the time period for which the person holds the asset. Investors tend to have a longer time-horizon, while traders hold the asset for shorter time periods.
Nigel- His motive doesn't seems to gain from the short term price fluctuations of the stock neither he does that regularly. Thus, he is not likely to be a trader.
Tristan- Since, he hopes to gain profit from the short term changes in stock prices he is mostr likely to be a tarder.
Ivan- Since, he holds the stock for more than a year after spending time on researching about the company to make sure he is investing his amount in right place. He will be thus not considered as a trader and is a investor.
Andre- Since his motive is not to earn from short term fluctuations in the stock but earn dividends and invest in value. Thus he is not a trader but an investor.
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