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REG > Other Entity Taxation, Professional Responsibilities, and Federal Tax Procedures > Flashcards

Other Entity Taxation, Professional Responsibilities, and Federal Tax Procedures Flashcards

1
Q

is an estate or trust allowed a standard deduction?

A

NO

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2
Q

when must an estate file a return on Form 1041?

A

if the estate has gross income of 600 or more for the tax year and if none of the beneficiaries are nonresident aliens

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3
Q

what kind of fiduciary entity must adopt a calendar year for tax purposes?

A

trusts (except tax-exempt trusts)

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4
Q

what is a grantor trust?

A

when the creator is the owner of the trust

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5
Q

what kind of trust may distribute principal (corpus)?

A

complex

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6
Q

what is a disadvantage of a revocable trust?

A

the assets of the trust are still included in the estate of the grantor

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7
Q

how do you figure out the income distribution deduction?

A

its the amount of income taxed to the beneficiaries

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8
Q

how is the income from a revokable trust reported? (i.e., on which forms/schedules?)

A

on the grantor’s Form 1040

*the trust is disregarded for tax purposes

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9
Q

when must a gift tax return be filed?

A

if a TP gives a taxable gift in excess of 15,000 per donee, TP is required to file Form 709.

  • anything over the 15,000 is taxed
  • 30,000 if married couple and treat gift as made by 1/2 from each spouse
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10
Q

what is the maximum amount that can be transferred pursuant to a death tax-free?

A

11,580,000 in 2020

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11
Q

what are the 4 circumstances that are fully excluded from the gift tax?

A

payments made directly to educational institution for tuition

payments made directly to health care provider for medical care

charitable gifts

marital transfers

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12
Q

are campaign contributions considered a “gift”?

A

NO

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13
Q

T or F, imputed interest on an interest-free loan is subject to gift tax for each year the loan is outstanding.

A

T

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14
Q

when is the generation-skipping tax imposed?

A

imposed on transfers of future interest who are two generations or more below the donor’s generation

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15
Q

what kind of gift does not qualify for either a deduction or the annual exclusion from gift tax?

A

a future interest gift

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16
Q

what type of expenses are deductible against the gross estate for purposes of the federal estate tax?

A

accounting and legal fees to settle the estate

funeral costs

taxes (excluding the federal estate tax itself)

estate debts

certain medical expenses

claims against the estate

transfers to spouse

charitable contributions

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17
Q

what is the marital deduction?

A

all items in the decedent’s estate and transferred to the spouse

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18
Q

when is the estate tax return (Form 706) due?

A

9 months after the date of death

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19
Q

what is the value of a gift for gift tax purposes?

A

FMV at the date of gift.

*remember that value is different than basis

20
Q

what is unrelated business income?

A

income derived from an activity that constitutes a trade or business that is:

regularly carried on
AND
is not substantially related to the organization’s tax-exempt purpose

  • this type of income is taxable
  • work performed by unpaid volunteers is not considered unrelated business
21
Q

organizations qualify as tax-exempt if… (3 things)

A

it is both organized and operated exclusively for religious, charitable, scientific, literary, or educational purposes; for public safety testing; for the prevention of cruelty to children and animals; or to foster national or international amateur sports competition

no part of its net earnings goes to any private shareholder or individual

AND

no substantial part of its activities consists of carrying on propaganda or otherwise attempting to influence legislation

22
Q

when is an exempt organization not taxed on unrelated business income?

A

if it is less than 1,000

23
Q

Section 509 private foundations include all Section 501(c)(3) organizations, expect:

A

max 60% charitable deduction donees

broadly publicly-supported organizations

supporting organizations

public safety organizations

24
Q

in what situations can a CPA charge a contingent fee?

A

an IRS examination or audit

claim solely for a refund of interest and/or penalties

a judicial proceeding arising under the IRC

25
Q

what constitutes a covered opinion?

A

any written or electronic advice concerning transactions specific by the IRS as listed transactions

26
Q

how long must a CPA keep a completed copy of a return?

A

3 years after the close of the return period

27
Q

what are the 3 broad categories of misconduct?

A

misconduct while performing accounting services

misconduct outside the scope of performing accounting services

criminal conviction

28
Q

what are the due diligence requirements for the earned income credit?

A

eligibility checklists

computation workpapers

record retention

reasonable inquires to the taxpayer

29
Q

what is the civil penalty for aiding and abetting an understatement of tax liability on a tax return?

A

1,000 for all taxpayers

10,000 for corporations

*burden of proof shifts to the IRS from the taxpayer

30
Q

what criteria goes with each?

position does not involve a tax shelter

position does involve a tax shelter

A

substantial authority or a reasonable basis for the position

more-likely-than-not

31
Q

what are the percentages that go along with the following?

more-likely-than-not

substantial authority

reasonable basis

A

more than a 50% chance of succeeding

more than a 33% chance, but less than a 50% chance of succeeding

at least a 20% chance of succeeding

32
Q

what does a statutory notice of deficiency (90-day letter) explain to the taxpayer?

A

TP has 90 days to either pay or file a petition with the US Tax Court. TP does not have to pay in order to file a petition.

33
Q

does a temporary regulation have the same authority as a final regulation?

A

YES

34
Q

if the TP and IRS cannot reach an agreement, what is next?

A

US Tax Court, US Federal Court of Claims, or a US District Court

*Tax Court does not require the TP to first pay, the other two do.

35
Q

are US District Court cases heard by one judge or a panel?

A

one

36
Q

can decisions of the US Tax Court Small Claims Division be relied on as precedent?

A

NO

37
Q

what does an accuracy related penalty apply to?

A

negligence or a disregard of the tax rules or regulations
AND
any substantial understatement of income tax

38
Q

what are the general requirements for a TP to avoid a tax penalty?

A

acted in good faith

did not have willful neglect

had REASONABLE CAUSE to support the tax return position

39
Q

if a CPA commits gross negligence (constructive fraud), who is the CPA liable to?

A

all plaintiffs, including those who are unknown to the CPA

40
Q

what constitutes negligence?

A

when a CPA breaches a duty of care

*CPA’s best defense is to prove that due care was taken

41
Q

what is the restatement rule?

A

if a CPA performs an audit negligently, the CPA is liable to the client and any foreseeable persons whom the CPA knows will be relying on the audit

42
Q

what are the 5 elements of common law (actual) fraud?

A

misrepresentation of material fact

intent to deceive

actual and justifiable reliance by plaintiff

scienter

damages

43
Q

ultramares limits the accountant’s liability for negligence to…

A

parties in privity
AND
intended third party beneficiaries

44
Q

what are the 4 elements of negligence?

A

defendant owed a duty of care to the plaintiff

defendant breached that duty by failing to act with due care

breach caused the plaintiff’s injury

damages

45
Q

what is the difference between constructive fraud (gross negligence) and actual fraud?

A

constructive does not require intent, only reckless disregard

actual requires intent to deceive

REG (8 decks)

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