CA Taxation & Regulatory Compliance 5

Question 1

A taxpayer who fails to file a tax return and fails to pay tax owed will face combined monthly penalties that cannot exceed what maximum percentage of the unpaid tax?

Accepted Answer

47.5%

Answer

The failure-to-file penalty (max 25%) and failure-to-pay penalty (max 25%) can combine up to 47.5% of the unpaid tax, per IRS rules coordinating the two penalties.

Question 2

Under IRC Section 1031, which of the following exchanges does NOT qualify for like-kind exchange treatment?

Accepted Answer

Investment real estate for a personal vacation home

Answer

A personal vacation home does not qualify as investment or business property, so exchanging it for investment real estate does not meet the Section 1031 like-kind exchange requirements.

Question 3

When a CPA discovers a material error in a previously filed tax return, the CPA's primary obligation under Circular 230 is to:

Accepted Answer

Inform the client of the error and its potential consequences

Answer

Under Treasury Circular 230, the CPA must promptly advise the client of the error and recommend corrective action, but cannot notify the IRS without client consent.

Question 4

For federal estate tax purposes, the marital deduction allows a decedent to transfer what amount to a surviving U.S. citizen spouse?

Accepted Answer

An unlimited amount

Answer

The unlimited marital deduction under IRC Section 2056 allows a decedent to transfer an unlimited amount to a surviving U.S. citizen spouse free of federal estate tax.

Question 5

Which of the following costs must be capitalized under the UNICAP rules of IRC Section 263A?

Accepted Answer

Indirect production costs allocable to inventory

Answer

Section 263A (UNICAP) requires capitalization of direct and indirect costs properly allocable to inventory produced or acquired for resale, including overhead.

(CA) Certified Accountant Practice Test

(CA) Certified Accountant Practice Test

CA Taxation & Regulatory Compliance 5