REG02

Question 1

A purchaser may recover under Section 11 of the Securities Act of 1933 only if the purchaser brings a civil action within how long?

Answer 1

Within 1 year of the discovery of the omission and within 3 years of the offering date.

Question 2

What form must be filed with the Securities and Exchange Commission (SEC) by nonreporting and unseasoned issuers?

Answer 2

Form S-1.

Question 3

Is an accountant liable to all persons who are damaged by his or her negligence?

Answer 3

No, lack of privity is still a defense in some states. Under the primary benefit test, the accountant must have been aware that (s)he was hired to produce a work product to be used and relied upon by a particular third party. However, most courts now extend a CPA’s liability to anyone in a class of foreseen third parties who the CPA knows will use the information.

Question 4

Must an issuer file an offering statement with the SEC under the provisions of Regulation A Tier 1?

Answer 4

Yes, Under Tier 1, up to $20,000,000 is exempt from full registration with the SEC. But the issuer must file an offering statement with the SEC on EDGAR that contains specified disclosures.
Each offeree and purchaser must receive an offering circular containing concise narrative disclosures, and the issuer must file 2 years of FS.

Question 5

What are advantages of a Tier 1 offering?

Answer 5

Are that (1) ongoing reporting requirements do not apply and (2) the # and nature of investors are unlimited.

Question 6

What are the max dollar amounts under Regulation D, Rule 504, 505 and 506?

Answer 6

504 = $1 mil
505 = $5 mil
506 = No Max

Question 7

Under Section 10 and 18 of the Securities Exchange Act of 1934 a plaintiff must bring a suit within how long?

Answer 7

The earlier of 2 years after discovery of the facts on which the suit is based or 5 years after the cause of action arose.

Question 8

What are the amounts of investors under Regulation D, Rule 504, 505 and 506?

Answer 8

504 = Unlimited Accredited and Nonaccredited

505 & 506 = Unlimited Accredited and no more than 35 Nonaccredited

Question 9

Does Rule 10b-5 of the Securities Exchange Act of 1934 require that the wrongful act be accomplished through the mail, any other use of interstate commerce, or through a national securities exchange?

Answer 9

Yes

Question 10

When must a claim for refund must be made?

Answer 10

A refund may be claimed 3 years from the time the return was filed or 2 years from the time the tax was paid, whichever is later.

Question 11

Can a son and daughter-in-law living with a taxpayer qualify as dependents if they filed a joint return, other than to claim a refund?

Answer 11

No, despite living with the taxpayer, filing jointly prevents them from qualifying as dependents on another return.

Question 12

Does a dependent have to satisfy both the relationship and domicile requirement to qualify as a dependent?

Answer 12

No, an individual must satisfy either a relationship or a domicile requirement but does not have to satisfy both.

Question 13

Can the 10-year collection period be extended after it has expired, if there has been a levy on any part of the taxpayer’s property prior to the expiration and the extension is agreed to in writing before the levy is released?

Answer 13

Yes, The period may be extended after the expiration thereof if there has been a levy on part of the taxpayer’s property prior to such expiration and if the extension is agreed upon in writing prior to a release of the levy.

Question 14

What is the failure to pay tax penalty?

Answer 14

The penalty for failure to pay tax is 0.5% of the amount due for each month

Question 15

What is a useful tool in determining Congressional intent behind certain tax laws and helping examiners apply the law properly?

Answer 15

Congressional Committee Reports reflect Congress’ intent behind certain tax laws and help examiners apply the law properly.

Question 16

What is the safe harbor that the Private Securities Litigation Reform Act of 1995 provides in connection with releases of info by the corporation through reports, speeches, public announcements, or press releases?

Answer 16

Safe harbor from liability for companies that make such statements if they are (1) not material, (2) made without actual knowledge that they are false or misleading, or (3) accompanied by meaningful cautionary statements that identify risk factors that could cause actual results to differ materially from those in the statement.

Question 17

Are interpretative and legislative regulations that clarify an ambiguous term in the Code given great weight by the courts?

Answer 17

Yes

Question 18

What are the due dates for S Corps and Partnerships?

Answer 18

3rd month after, if extension 6 months after that.

Question 19

What are the due dates for C Corps, Individuals, and Estate/Trusts?

Answer 19

4th month after, if extension 6 months after that. Except with an estate/trust it is end of 5th month.

Question 20

What are the due dates for Exempt Organization?

Answer 20

5th month after, if extension 6 months after that.

Question 21

What is the accuracy-related penalty due to disregard of rules and regulations, or substantial understatement of income tax and how can it be avoided?

Answer 21

May be avoided if the return position is adequately disclosed and has a reasonable basis. Generally, the penalty is equal to 20% of the underpayment. Substantial understatement of income tax occurs when the understatement is more than the larger of 10% of the correct tax or $5,000.

Question 22

Is net unearned income of a dependent child taxed to the dependent at the parents’ marginal rate?

Answer 22

Yes, minus the std deduction x 2

Question 23

What do you use if calculating gross income that is omitted from the return which exceeds 25% of gross income reported on the return?

Answer 23

For a trade or business, gross income = total of the amounts received from the sale of goods before deductions and COGS.

Question 24

A refund claim for overpayment of tax due to losses from worthless securities may be filed up to how many years after the they became worthless?

Answer 24

Up to 7 years after the year in which they became worthless.

Question 25

How many days can you rent your personal dwelling to be is excluded from income?

Answer 25

Excluded from income if rented for less than 15 days during the year.Also, no deductions are allowed for rental use if rented for less than 15 days during the year.

Question 26

If an individual always claims the standard deduction, would he take the deduction for state taxes paid and include the refund in this year’s gross income?

Answer 26

No, if always claims the standard deduction, he would not take the deduction for state taxes paid and would not have to include the refund in this year’s gross income.

Question 27

Can the installment method of reporting income be used by a taxpayer without the permission of the IR?

Answer 27

Yes, in general, the installment method of reporting income may be used by a taxpayer without the permission of the IRS

Question 28

What is the requirements for C Corps to not use the accrual method of accounting?

Answer 28

The accrual method of accounting must be used for C corporations unless they have < $5 million average annual gross receipts in the preceding 3 years. If average revenues > $20 million, the gross receipts must have been at least this amount.