CTC Documentation & Legal Requirements 5

Question 1

A taxpayer makes a like-kind exchange under IRC §1031. What documentation must be maintained to support the deferred gain?

Accepted Answer

Exchange agreement, identification notices, closing statements for both properties, and basis calculations

Answer

A §1031 exchange requires the exchange agreement, written 45-day identification notices, closing statements for relinquished and replacement properties, and a basis carryover schedule.

Question 2

Under Circular 230 §10.34, a practitioner may not sign a return that contains a position unless that position has at least what standard of likelihood of being sustained?

Accepted Answer

Realistic possibility of success — approximately a 1-in-3 or better chance

Answer

Circular 230 §10.34 requires a 'reasonable basis' or better for disclosed positions, but signing a return requires at least a 'realistic possibility of being sustained on the merits' (roughly 33%).

Question 3

A taxpayer sells a rental property. Which documents are needed to calculate the adjusted basis for gain or loss purposes?

Accepted Answer

Original purchase price, settlement statements, all capital improvement records, and depreciation schedules

Answer

Adjusted basis = original cost + capital improvements − depreciation allowed/allowable; all settlement statements and improvement receipts are required to trace each component.

Question 4

An estate with a gross estate exceeding the filing threshold must file Form 706. What is the deadline for filing and paying the estate tax?

Accepted Answer

9 months after the decedent's date of death, with a 6-month extension available for filing

Answer

Form 706 is due 9 months after the decedent's date of death; a 6-month automatic extension for filing (but not for payment) may be obtained by filing Form 4768.

Question 5

A taxpayer receives a corrected Form 1099 (1099-CORR) after already filing their return. What is the appropriate legal response?

Accepted Answer

File an amended return (Form 1040-X) to reflect the corrected information

Answer

When a corrected information return changes the taxpayer's income, deductions, or credits, an amended return (Form 1040-X) must be filed to correct the original return.

(CTC) Chartered Tax Consultant Practice Test

(CTC) Chartered Tax Consultant Practice Test

CTC Documentation & Legal Requirements 5