ASA Legal & Regulatory Framework 2

Question 1

ASC 820 (formerly SFAS 157) establishes a fair value hierarchy. Which level relies on observable inputs from active markets for identical assets?

Accepted Answer

Level 1

Answer

Level 1 inputs are quoted prices in active markets for identical assets or liabilities — the most reliable and least subjective fair value measure.

Question 2

Under ASC 820 fair value measurement, 'principal market' is defined as the market that has:

Accepted Answer

The greatest volume and level of activity for the asset

Answer

The principal market is the one with the most activity and volume for the asset, providing the most representative price indication.

Question 3

Which Internal Revenue Code section governs the deductibility of charitable contributions of appreciated property and requires a qualified appraisal?

Accepted Answer

Section 170

Answer

IRC Section 170 and its regulations specify the rules for deducting charitable contributions, including the qualified appraisal requirement for non-cash gifts over $5,000.

Question 4

In US gift and estate tax valuation, IRC Section 2031 defines the gross estate to be valued at:

Accepted Answer

Fair market value at the date of death (or alternate valuation date)

Answer

IRC Section 2031 requires all estate assets to be included at their fair market value as of the date of death, or the alternate valuation date if elected.

Question 5

The IRS imposes a penalty under IRC Section 6662 for 'substantial valuation misstatements' when the claimed value is what percentage of the correct value?

Accepted Answer

150% or more (or 65% or less for underpayments)

Answer

A substantial valuation misstatement occurs when reported value is 150% or more (or 65% or less) of the correctly determined value, triggering a 20% penalty.

ASA - American Society of Appraisers Certification Practice Test

ASA - American Society of Appraisers Certification Practice Test

ASA Legal & Regulatory Framework 2