Reg - 3

Question 1

Realistic Possibility

Answer 1

Positions with a realistic possibility of being sustained (essentially between 33% and 50%) need not be disclosed.

Question 2

Realistic Possibility - takes into account

Answer 2

Well-reasoned articles
Tax treatises
IRS General Counsel Memoranda

Question 3

Under which of the following circumstances must CPA Tax Advisor disclose the use of estimates for his clients

Answer 3

A. The taxpayer is ill at the time the return must be filed.

B. The taxpayer has not yet received a K-1 for a partnership in which she is a general partner.

C. The taxpayer is a major shareholder of a corporation that is tied up in bankruptcy.

Question 4

Must an answer omission be disclosed?

Answer 4

If reasonable grounds exist to omit an answer, they need not be disclosed, says SSTS No. 2.

Question 5

What test has the IRS adopted for tax shelters?

Answer 5

the “more likely than not” test

Question 6

Unilateral Contract

Answer 6

can only be accepted by performing an act. It is a valid contract.

Question 7

What governs real property interests, and does that include leases?

Answer 7

common law; yes

Question 8

4 requirements for a valid contract:

Answer 8

1. offer and acceptance
2. consideration
3. legal capacity
4. legal purpose

Question 9

executory contract

Answer 9

not fully performed

Question 10

bilateral contract

Answer 10

a promise in exchange for a promise creating a contract

Question 11

Indemnity Contract

Answer 11

A contract involving two parties in which the first party agrees to indemnify and reimburse the second party for covered debts or losses should they take place

Question 12

Surety Contract

Answer 12

Surety agrees with the creditor to pay for the debt or default if the debtor does not

Question 13

Surety

Answer 13

the party that agrees to pay the creditor if the debtor defaults

Question 14

Third party beneficiary

Answer 14

when two parties make a contract that intends to benefit a third party

Question 15

Cosureties

Answer 15

When 2 or more sureties agree to be sureties for the same obligation to the same creditor; they have joint and several liability

Question 16

Does a surety fall under the Statue of Frauds

Answer 16

yes. surety contracts must be in writing

Question 17

Right of contribution

Answer 17

Cosureties are liable in contribution for their proportionate shares of the debt. If a cosurety pays more than this amount, he may seek contribution for the excess from the other cosureties

Question 18

Right of reimbursement

Answer 18

Is against the debtor to collect any amounts paid by the surety

Question 19

Subrogation

Answer 19

when the surety pays the creditor, it “steps into the shoes of the creditor” and obtains the same rights against the debtor that the creditor had

Question 20

Exoneration

Answer 20

If the debtor is able to pay, the surety may require the debtor to pay before the surety pays.