Question

Which is true? a. Gain on the sale of municipal bonds is excluded from tax. b. The Additional Medicare Tax applies only to self-employment income. c. In order to be subject to the kiddie tax the child must qualify as a dependent. d. Advance rental payments are taxed when eamed (not when received) by an accrual-basis taxpayer. e. None

Answer 1

Ans E

None of these statements are correct, all statment are wrong-

A- Income from investing in municipal bonds is generally exempt from Federal and state taxes for residents of the issuing state. While the interest income is tax-exempt, any capital gains distributed are taxable to the investor. Income for some investors may be subject to the Federal Alternative Minimum Tax (AMT).so statement is wrong

B -The Additional Medicare Tax applies to wages, railroad retirement (RRTA) compensation, and self-employment income over certain thresholds. Not only self employed so statement is wrong

C - It doesn't matter whether the child is claimed as a dependent on the parent's return. ... Moreover, the kiddie tax applies only to unearned income a child receives from income-producing property (or investment property), such as cash, stocks, bonds, mutual funds, and real estate. so The kiddie tax applies to all children who are 19 years of age and younger.this statement is also wrong.

D -If an advance payment is labeled a "security deposit" in a lease, but there's no obligation to pay it back to a tenant and it may be used to cover future rental payments, the payment is actually an advance payment of rent and is taxable when received.so rent income is taxable when it received .

Conclusion:-

Thus all statment are wrong- ans E is right options