REG mod 35a

Question 1

Describe the Civil Fraud Penalty.

Answer 1

A penalty of 75% is imposed on the understatement of tax that is due to fraud.

Question 2

Describe what is meant by the term ‘materially participates’.

Answer 2

This means that a person is involved with the activity on a regular and continuous basis.

Question 3

Leasehold improvements are depreciated for 10 years. True / False

Answer 3

False. Leasehold improvements are depreciated using the straight line method for 15 years.

Question 4

The alternate valuation date for an estate is irrevocable. True / False

Answer 4

TRUE

Question 5

What are the two types of qualified residence interested?

Answer 5

Acquisition indebtedness and home equity indebtedness

Question 6

What requirements must be met in order to collect unemployment income?

Answer 6

The person must be unemployed, through no fault of their own. The person must be willing and able to work.

Question 7

When considering the selection of a fiscal year, the rules related to trusts are more stringent than the rules related to an estate. True / False

Answer 7

True. A trust is required to have a taxable year end of December 31; an estate may adopt any year end.

Question 8

When does the amortization of a corporation’s start-up costs begin?

Answer 8

The month in which the business activity begins

Question 9

When is an asset depleted and not depreciated?

Answer 9

When the asset is a natural resource.

Question 10

A loss on the sale of property to a related party is never deductible. True / False

Answer 10

TRUE

Question 11

A Net Operating Loss (NOL) may be carried back two years or carried forward 20 years. True / False

Answer 11

True. Remember: NOL = 2 back / 20 forward

Question 12

A scholarship may be included in income by a degree seeking candidate if the student uses the money to pay for ___________.

Answer 12

Room & Board.

Question 13

A self-employed individual must file form 1040 if the net earnings are greater than _____.

Answer 13

$400

Question 14

A taxpayer will avoid penalties related to estimated taxes if the taxpayer pays at least 90% of the current year’s tax. True / False

Answer 14

True. The tax payer can also avoid penalties related to estimated taxes if the taxpayer pays 100% of the prior year’s tax liability.

Question 15

A taxpayer’s in-laws are considered to be related parties. True / False

Answer 15

False. In-laws are not considered to be related parties.