REG19

Question 1

Can a limited partner withdraw his or her capital contribution absent sufficient limited-partnership property to pay all general creditors?

Answer 1

No, outside creditors have priority over liabilities to limited partners for the return of their capital contributions. May not withdraw capital contribution if the effect is to impair the creditors’ rights.

Question 2

In order to avoid penalties with a disclosed position, the tax preparer must believe that the position has a ore likely than not chance of being sustained or a reasonable basis of being sustained?

Answer 2

A reasonable basis.

Question 3

Is there a fine to a CPA if they unknowingly prepare a frivolous tax return for one of its clients?

Answer 3

Yes

Question 4

Is a CPA subject to a fine and suspension if in a non-tax related matter, a CPA is found guilty of perjury in a court of law?

Answer 4

Yes

Question 5

When is a 1099-DIV filed?

Answer 5

Distributions in excess of $10 were made as dividends, capital gains, or nontaxable distributions, tax was withheld under the backup withholding rules, or a liquidating payment of $600 was distributed.
Royalties are generally reported on 1099-MISC or 1099-S.

Question 6

Can you claim your sister as a dependent if her gross income was $20,000?

Answer 6

No, does not qualify as a dependent because she had gross income in excess of $4,150.

Question 7

Are taxes assessed for local benefit expenses when assessed, when paid or added to the property’s AB?

Answer 7

If they tend to increase the value of real property, such as sidewalks, they are added to the property’s AB and are not currently deductible as tax expense.

Question 8

What is the filing due date for C Corps?

Answer 8

If June 30 = 3rd & 10th month. All others = 4th & 10th month

Question 9

Is a keogh plan deductible on Schedule C for a self-employed dentist?

Answer 9

No.

Question 10

If claimed itemized deductions and then received a state tax refund, would you include the full amount of the refund or just the amount in excess of the standard deduction?

Answer 10

Just the amount in excess of the standard deduction.

Question 11

Does a taxpayer materially participate in an activity during a tax year if participation is more than 500 hours?

Answer 11

Yes

Question 12

Is the value included in compensation for a stock option the difference between FMV and exercise price or just FMV?

Answer 12

It is the difference between FMV and exercise price

Question 13

Does an S Corp, a partnership or LLC receive basis for the debt of the entity?

Answer 13

Only partnership or LLC receive basis for the debt of the entity. S Corp does not.

Question 14

Are customer lists, trade names and goodwill all intangible assets and should be amortized?

Answer 14

Yes, intangible assets are recovered over the asset’s useful life or, in the case of Sec. 197 intangibles, 15 years.

Question 15

If there is a liability assumed by an S Corp on property contributed, would there be a gain to the SH?

Answer 15

Yes, if the liability exceeds the AB in the property.

Gain = Liability - AB

Question 16

Do self-employment tax and health insurance reduce the net earnings from self-employment?

Answer 16

No

Question 17

How do you calculate the net earnings from self-employment?

Answer 17

Gross receipts - the business expenses.
Line 4 on Schedule SE requires the tax preparer to multiply the net profit or (loss) by 0.9235 to get the net earnings from self employment.

Question 18

What type of entity has the most flexible accounting period?

Answer 18

C Corp

Question 19

Is there a max tax deduction for real estate taxes?

Answer 19

Up to a total of $10,000, for both the primary and secondary homes.

Question 20

Is there a limit on the interest deduction for both the primary and secondary homes?

Answer 20

NO, the interest deduction is allowed for both the primary and secondary homes.

Question 21

If a partner has a gain on property contributed to a partnership due to the relief of a liability, what is the partnership’s basis in the property?

Answer 21

AB + Gain

Question 22

Do you recognize a gain when exchanging stock?

Answer 22

Yes, FMV - AB in stock

Question 23

If gift tax is paid how do you figure out the basis in the property received?

Answer 23

Gift Tax Paid x (FMV - Orig Basis) / (FMV - Gift exclusion $15,000)

Question 24

When dealing with transfer of property for 100% stock, gain is calculated as what if there is boot?

Answer 24

Lesser of the realized gain or the boot received.

Question 25

Is it true that even if no tax is due, an information return is required to be filed and all corporations chartered in a state within the U.S. must file federal tax returns annually, even “pass-through” entities and nonresident aliens must file a tax return in the U.S. and pay a flat 30% tax for only their U.S. source income?

Answer 25

Yes

Question 26

What are the two rules to be considered a substantially disproportionate distribution?

Answer 26

The SH must own < 50% of all outstanding voting stock immediately after and the total % of ownership must be < 80% of prior ownership percentage immediately before the redemption.

Question 27

If corp distributions are more than current E&P, how do you determine the amount that goes to current E&P versus AE&P?

Answer 27

Current E&P x (distribution amount / total distributions for the year)
Remaining distribution goes to AE&P.