R6

Question 1

What is Unrelated business taxed as?

Answer 1

Unless the organization is taxable as a trust, the UBI is subject to reg corp taxes

Question 2

What are the damages imposed against an accountant who breaches contract for professional services, duties owed to a client?

Answer 2

Money damages(compensatory)

Question 3

What type of penalty can be assessed to a CPA for not performing proper inquiries?

Answer 3

CPA can be charged with a tax return preparer penalty

Question 4

What is the difference between a simple and complex trust?

Answer 4

Complex can distribute from principal while simple cannot

Question 5

What is the threshold of gross income in order to file a 1041?

Answer 5

$600

Question 6

What is the Charitable contribution deduction for estates?

Answer 6

Unlimited if expressed in the will

Question 7

Which entity can elect a calendar yea?

Answer 7

Estates can elect, Trust are required

Question 8

When are ordinary and necessary admin expenses deductible?

Answer 8

To deduct admin expenses, statement must be filed with the income tax return stating that those deductions have not been taken on the decedents estate tax return

Question 9

If the DNI is less than the distributions, how do you calc the individual distributions?

Answer 9

Pro rata distributions

1. add up total distributions
2. take % of trustees distribution to 1
3. multiple percentage * DNI

Question 10

What is the rule of waving medical expenses for decedent?

Answer 10

if the waiver is filed, medical expenses paid for the decedent by their executor within one yr of her death can be deducted on the decedents final income tax return

Question 11

What are some valid deductions from a decedents gross estate?

Answer 11

outstanding debts of decedent, Claims against the estate , funeral costs, Certain taxes

Question 12

What entity/organization is applicable to the unlimited exclusion for gifts?

Answer 12

1. Payments made directly to edu institution
2. Payments made directly to healthcare provider for Medical Care
3. Charitable gifts (church)
4. Marital deduction

Question 13

How many years is imputed interest subjected to?

Answer 13

imputed interest on an interest-free loan is subject to gift tax for each year the loan is outstanding

Question 14

What is the threshold for unrelated business income in order to be taxed?

Answer 14

An exempt organization is not taxed on unrelated business income of less than $1k

Question 15

What is the qualification in order to not be an exempt organization?

Answer 15

To qualify as an exempt organization: applicant must not be a private foundation organized and operated exclusively to influence legislation

Question 16

What entity cannot file for a 501c3 exemption?

Answer 16

A partnership

Question 17

What does a CPA do when the IRS requests them to provide client records that the CPA does not have?

Answer 17

Notify the IRS of the identity of any person who, to the CPA’s knowledge, could have the records

Question 18

What is not an example of written advice?

Answer 18

electronic communication

Question 19

How long does a CPA have to retain tax returns for?

Answer 19

CPA must retain completed copy of each return for 3 years after the close of the return period

Question 20

What are acceptable circumstances for disclosures of tax return information?

Answer 20

Computer processing, Peer review, Administrative order

Question 21

What is the Penalty for failure to file?`

Answer 21

5% per month or fraction of tax due

Question 22

What are some examples of civil fraud?

Answer 22

Civil fraud penalties require conduct that transcends negligence or stupidity.

ex) Maintaining false records and reporting fictitious transactions

Question 23

How many judges are on the US district Court?

Answer 23

One

Question 24

Define the majority rule

Answer 24

Accountants are liable to anyone in a class(potential lenders or investors) of 3rd parties whom the CPA knows will rely on the opinion of the financial statements

Question 25

Define the Ultramers rule`

Answer 25

Ultramares rule limits the accountant’s liability for negligence to :

1. parties in privity and
2. intended 3rd party beneficiaries; parties who are merely “foreseen” cannot recover

Question 26

What is the difference between Actual and Constructive fraud?

Answer 26

Constructive fraud only requires reckless disregard for truth or falsity
Actual fraud requires intent in making a material misstatement, upon plaintiff justifiably relies and suffers damages
** THE difference is that Constructive does not require intent”**

Question 27

What are the elements of negligence?

Answer 27

duty of care
breach
causality
injury

Question 28

What are the 5 elements of fraud?

Answer 28

Misrepresentation of material fact, 
intent to deceive
Actual and justifiable reliance
intent to induce that reliance
damages

Question 29

What is the standard deduction for a trust/estate in income tax?

Answer 29

0 idiot

Question 30

How is the tax year determined for Estates?

Answer 30

An estate can elect calendar year or fiscal year

Question 31

How may the professional fees be communicated to the taxpayer?

Question 32

What is an accuracy related-related penalty applied to?

Answer 32

Applied to portion of tax underpayments attributable to negligence or disregard of tax rules and regulations as well as to any substantial understatement of income tax

Question 33

Under common law negligence, what is the minimum one must prove?

Answer 33

failed to exercise due care

Question 34

What are the elements of negligence?

Answer 34

Duty of care
Breach(lack of due care)
Casualty
Injury

Question 35

When are annual filings for public service charitable entity?

Answer 35

they arent required idiot

Question 36

What is the penalty to the IRS for a CPA making an error in calculating the return?

Answer 36

none stupid

Question 37

What are S corp dividends distributions taxed as?

Answer 37

taxed as unrelated business income at corp rates

Question 38

How many judger are at the District court level?

Answer 38

One judge, not panel