Mid June Quizzes

Question 1

Section 1231 net gains are treated as…

2) what can they do?

Answer 1

1 long term capital gains

2 can offset against long term capital loss

Question 2

In a complete liquidation, $12,000 fair market value of inventory with a basis of $8,000 distributed to a shareholder results in a…

Answer 2

$4,000 LT capital gain

Question 3

In a complete liquidation, equipment distributed to a shareholder where FMV exceeds basis results in…

Answer 3

A long term capital gain

Question 4

In a complete liquidation of an 80% owned corporation, the liquidation qualifies under…

Answer 4

Section 332 as nontaxable liquidation

Question 5

Sec. 332 is a nontaxable liquidation of…

Answer 5

A controlled subsidiary into its parent

Question 6

In section 332 liquidation sale, with liquidating corporation, how are distributions to shareholders owning less than 80% recognized?

Answer 6

1 Gains are recognized

2 losses are not recognized

Question 7

In section 332 liquidation sale, with liquidating corporation, how are distributions to shareholders at least 80% recognized?

Answer 7

No gain or loss is recognized

Question 8

Salaries and wages paid, where does it go on the partnership return?

Answer 8

Form 1065 only

Question 9

Work opportunity credit, where does it go on the partnership return?

Answer 9

Schedule K and schedule K-1

Question 10

If a SIM doesn’t specify other than the partners have equal interest in profit and loss, how are guaranteed payments divided up on schedule K-1?

Answer 10

Multiply by 50%

Question 11

On form 1065, is amortization of the permanent liquor license allowed for tax purposes? Why or why not?

Answer 11

No allowed

Because license is renewable for an indefinite period

Question 12

If a partnership has depreciation of $110,000 and elects to expense $100,000. How much depreciation can be deducted on form 1065?

Answer 12

$10,000 ($110,000 - $100,000)

Question 13

Health insurance premiums are treated as…

Answer 13

Guaranteed payments

Question 14

On a simulation market insurance premiums would appear on what forms of a partnership return?

Answer 14

1065, sch. k and sch. K-1

Question 15

With $14,000 of contributions to a defined pension benefit plan (Keogh), where $8,000 was paid on behalf of the partner’s, where does this go on the partnership return?

Answer 15

Form 1065 = $6,000 (14k-8k)

Form K = $8,000

Form K-1 = $4,000 (8k X 50%)

Question 16

On a SIM that deals completely with expenses, do not use…

Answer 16

Paratheses

Question 17

Under the Negotiable Instruments Article of the UCC, which of the following defenses generally may be used against all holders of negotiable instruments?

Answer 17

Minority of the maker

Question 18

Minority of the maker is a…2

Answer 18

1 Real defense

2 assertable against any party

Question 19

Voluntary bankruptcy is available to debtor’s whose…

Answer 19

Income does not exceed monthly limits

Question 20

A tenant may be evicted from an apartment if he…

Answer 20

Uses it for illegal purposes (counterfeiting money)

Question 21

In deciding whether consideration necessary to form a contract exists, a court must determine whether…

Answer 21

There is mutuality of consideration

Question 22

Mutuality of consideration, means that each party is bound to…

Answer 22

Give consideration in exchange for the consideration given by
Other party to contract

Question 23

State taxes of a corporation have a higher priority than…

Answer 23

Legal fees owed to law firm for services unrelated to bankruptcy

Question 24

What provision contained in an otherwise negotiable instrument will cause it to be nonnegotiable?

Answer 24

It grants holder an option to purchase land

Question 25

If an instrument contains a promise to do any act in addition to payment of money it is...

Answer 25

Nonnegotiable

Question 26

When repossessed collateral is sold, the first obligations that are paid are...

Answer 26

The expenses that the 3rd party has incurred relating to | repossession and sale of collateral

Question 27

A surety may exercise the defenses against the seller of...2

Answer 27

1 fraud committed against the debtor 2 fraud committed against the surety

Question 28

In a situation where the seller refuses to sell a warehouse that the had agreed to sell in the contract, what damages is the plaintiff entitled to? 2 2) Is the plaintiff entitled to both?

Answer 28

Either specific performance or compensatory damages 2) no

Question 29

Machinery is what kind of property?

Answer 29

Section 1245 property

Question 30

When machinery that cost $20,000 and has an adjusted basis of $14,000 is destroyed in a fire. If insurance proceeds received are $30,000 and a new machine is bought for $25,000. What is the ordinary income resulting from the involuntary conversion?

Answer 30

$6,000 gain recognized (limited to depreciation recapture)

Question 31

Taking of a negotiable instrument for future consideration will not constitute value in determining whether...

Answer 31

Person is a holder in due course

Question 32

Under the Revised Model Business Corporation Act, a stockholder has the right to...

Answer 32

Inspect the books and records with 5 days notice

Question 33

Any transfer for value of an order instrument gives the transferee the right to obtain...

Answer 33

An unqualified endorsement from the transferor

Question 34

Karr transferred a negotiable instrument payable to his order to Watson for value. Karr did not endorse the instrument. As a result of the transfer, Watson is...

Answer 34

Entitled to an unqualified endorsement by Karr

Question 35

Under the position taken by a majority of courts, to which third parties will an accountant who negligently prepares a client's financial report be liable?

Answer 35

Any foreseen or known third party who relied on the report

Question 36

Pertaining to the CPE requirements, state boards typically require that the candidate...

Answer 36

Attest to their jurisdiction that they have completed the | requirements for continuing education

Question 37

The term "loan" includes which 3 items?

Answer 37

1 guarantee of loan 2 letter of credit 3 line of credit

Question 38

Loss on sale of a building depreciated on the straight line basis and gain on sale of land are...

Answer 38

Section 1231 net gains

Question 39

What is a work product doctrine (AKA Work product rule)?

Answer 39

Doctrine that protects work product from detection

Question 40

Under Section 11 of the Securities Act of 1933, which of the following standards may a CPA use as a defense?

Answer 40

GAAP

Question 41

Where can a candidate find information that will allow him or her to maintain licensure records and view requirements for multiple jurisdictions?

Answer 41

NASBA tools for accounting compliance

Question 42

The method used to depreciate partnership property is an election made by...2

Answer 42

1 the partnership 2 may be method approved by IRS

Question 43

When a nontaxable stock dividend is distributed, you should multiply the ratio of shares by...

Answer 43

Original stock basis

Question 44

In a nonliquidating distribution...

Answer 44

No loss is recognized

Question 45

Lease improvements are not...

Answer 45

Not reported in rental income (only cash)

Question 46

At risk limitation provisions of the IRC may limit...

Answer 46

A partner's deduction for his or her distributive share of partnership losses

Question 47

What refunds are and are not included in income in schedule 1040?

Answer 47

State refund included Federal refund not included

Question 48

A plaintiff does not have to prove reliance on materially misstated financial statements under...

Answer 48

Section 11 of Securities Act of 1933

Question 49

While preparing a client's individual federal tax return, the CPA noticed that there was an error in the previous year's tax return that was prepared by another CPA. The CPA has which of the following responsibilities to this client?

Answer 49

Inform the client and recommend corrective action

Question 50

Under the confidentiality rules, the tax practitioner is prohibited from discussing tax return information with anyone without...

Answer 50

Prior consent of the client

Question 51

Where is student loan interest of up to $2500 deducted?

Answer 51

Deducted to arrive at AGI

Question 52

When property is repossessed after an installment sale, the tax payer must...

Answer 52

Recognize gain or loss

Question 53

Regulation Rule 504 of Reg D: information furnished to investors

Answer 53

Does not require specific info be furnished to investors

Question 54

The first purchaser, who doesn't record the deed and a subsequent purchaser who knew the first purchaser didn't record. Who wins under the notice statute?

Answer 54

First purchaser, they bought in good faith

Question 55

The first purchaser, who doesn't record the deed and a subsequent purchaser who records and who knew the first purchaser didn't record. Who wins under the race statute?

Answer 55

Second purchaser

Question 56

The first purchaser, who doesn't record the deed and a subsequent purchaser who records and who knew the first purchaser didn't record. Who wins under the race-notice statute? Why?

Answer 56

First purchaser Second purchaser was aware other purchaser didn't record, so they We're not a good faith purchaser

Question 57

The Sales Article of the UCC applies to...

Answer 57

The sale of goods

Question 58

Although certain provisions apply only to transactions between merchants, the general scope of the UCC sales Article extends to...

Answer 58

Sales between no merchants as well

Question 59

1 Loss on sale of building depreciated on the straight line basis 2 gain on sale of land used in the business 3 loss on sale of investments in securities What do they have in common?

Answer 59

Included in both taxable income and book income

Question 60

When is a stock redemption treated as a dividend?

Answer 60

When shareholders do not reduce their ownership percentage

Question 61

Stock redemption is treated as capital gain when shareholders...

Answer 61

Have dramatically reduced percentage ownership

Question 62

A corporation's bad debts on the tax return is...

Answer 62

Limited to the amount written off that year

Question 63

When can life insurance premiums be deducted?

Answer 63

When they don't cover a high level employee