7.2.7 Basic Quiz -- Tax on Net Investment Income

Sec. 4940(c) of the Internal Revenue Code sets forth guidelines for calculating net investment income.

True False

Private foundations are taxed on net investment income at a 30% rate.

True False

Under certain circumstances, some private foundations will be required to pay only 1% on their net investment income.

True False

"The gross amount of income from interest, dividends, rents, payments with respect to securities loans, and royalties, but not including any such income to the extent in computing the tax imposed by Sec. 511" is the definition of qualifying expenses.

True False

For purposes of calculating net investment income, capital losses are allowed to exceed capital gains.

True False

Capital losses can be carried over for five years.

True False

Ordinary and necessary expenses are used in the calculation of excise taxes.

True False

"Average payout percentage" is the average of the percentage payouts for tax years contained in the base period.

True False

"Base period" is defined as the nine taxable years preceding the current taxable year.

True False

Net investment income includes dividends.