CPE. Affordable. Easy. Fast. SO START NOW! ASCE ASCE. Share With Your Firm and Save! Earn CPE Starting at $5.75 Per Credit Hour

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1 545 Westcott Road Eagan, MN ASCE American Society for Continuing Education CPE: EASY. AFFORDABLE. SO START NOW. PRESORTED STANDARD U.S. POSTAGE PAID WEST One of the Largest CPE Providers with Thousands of Satisfied Customers Now Part of Thomson Reuters 2017 Thomson Reuters/Tax & Accounting. All Rights Reserved. Company, products and service names may be trademarks of their respective owners. AFFORDABLE CPE: ONLY ASCE MAKES IT THIS EASY! ASCE See inside back cover. Complete CPE Coverage for You and Your Firm! ASCE American Society for Continuing Education NEW! for 2017 Now Part of Thomson Reuters Affordable. Easy. Fast. Don t put your license in jeopardy. Get your CPE from ASCE! Share With Your Firm and Save! CPE One of the Largest CPE Providers With Thousands of Satisfied Customers VIP and CPE SO START NOW! Earn CPE Starting at $5.75 Per Credit Hour Block Specials Inside! See page ii or call % Satisfaction Guaranteed Instant Online Grading True/False Quizzers 387 Credits Inside + More Online Use Your Own Materials or The Credits You Need. The Price You Want. Share Credits and Save Even More Earn CPE With Materials You Already Own Hundreds of Credits Available Online Credits as Low as $5.25 Per Hour Free Resources Online asce.com Fast! Convenient! Affordable! CATASCP 17 / asce.com Fast! Convenient! Affordable! asce.com

2 a. ASCE American Society for Continuing Education Now Part of Thomson Reuters FAST, AFFORDABLE CPE. ONLY ASCE MAKES IT THIS EASY. Earn CPE credit in an instant for as low as $5.75 per hour! With ASCE s convenient quizzers, you can start earning CPE credits immediately. Simply choose your format (catalog or online), select a quiz, complete a series of true/false questions and submit your answers. ASCE quizzers are based on popular books, software and publications you already own or can access free on the internet and they even include references to help you locate relevant information. From Start to Finish in 4 Easy Steps! 1. Select Choose from any of the quizzers in this catalog or visit asce.com for additional quizzers available online. 2. Read Handy references direct you to relevant information you can read and review before answering each question. Visit asce.com for links to online resources. 3. Answer Fill out the answer sheet(s) on page A-1 of this catalog to record your responses to the true/false questions. Or log on to asce.com for online quizzers with instant grading. 4. Submit To receive credits for your ASCE quizzer(s), submit your answers and payment via one of the following methods: Online: Complete all questions and required fields including your ASCE block credit number (available from your sales representative) or credit card number then click to submit your answers and receive your CPE credits. Mail: Send your answer sheet(s) and payment to: ASCE Harris Bank Treasury Center Chicago, IL PHONE VISIT asce.com

3 CERTIFICATE OF COMPLETION ASCE will issue a certificate of completion when you achieve a passing score of 70% or better. To obtain CPE credit, you must submit a CPE reporting form to your state board of accountancy or professional organization indicating the amount of CPE for which you are applying. Contact your state board for complete information regarding status requirements. ASCE courses are written in accordance with various state boards of accountancy standards on formal self-study continuing professional education. States where we have entered into formal sponsor agreements with the State Board of Accountancy Hawaii ( ) Illinois ( ) New York (000821) Pennsylvania (PX L) States that do not offer formal sponsor agreements Alabama Iowa Montana Virginia Alaska Kentucky Nevada Washington Arizona Maine New Hampshire Wisconsin Indiana Michigan North Dakota Wyoming Contact your state board or professional association for details on your specific requirements or appropriate use of our courses. For further assistance, please call our customer service department at This publication contains CPE quizzers for professional reference books: from CCH, Thomson Reuters, J.K. Lasser and the IRS. However, the American Society for Continuing Education (ASCE) is in no way affiliated with reference material publishers CCH, J.K. Lasser (Wiley Publishers) and the IRS, product and service names may be trademarks of their respective owners. Furthermore, this ASCE catalog is designed to provide accurate and authoritative information in regard to the subject matter covered. It is sold with the understanding that the publisher is not engaged in rendering legal, accounting or other professional service. If legal advice or other expert assistance is required, the services of a competent professional person should be sought. From a declaration of principles jointly adapted by a Committee of Publishers and Associates 2017 Thomson Reuters/Tax & Accounting. All Rights Reserved. Company, products and service names may be trademarks of their respective owners. i CALL OR VISIT asce.com

4 ASCE 2017 TABLE OF CONTENTS Taxation Rcmd. CPE Credit Hours Quizzer Page # Available Online Quizzer Price CCH 2017 U.S. Master Tax Guide 40 1 $ CCH 2017 U.S. Master Tax Guide 24 9 $ RIA 2017 Federal Tax Handbook $ RIA 2017 Federal Tax Handbook $ JK Lassers Your Income Tax $ IRS Publication 17: Your Federal Income Tax $93.75 IRS Publication 590A: Contributions to Individual Retirement Arrangements (IRAs) 4 36 $25.00 IRS Publication 590B: Distributions from Individual Retirement Arrangements (IRAs) 4 38 $25.00 IRS Publication 334: Tax Guide for Small Business 8 40 $50.00 IRS Publication 535: Business Expenses 8 43 $62.50 IRS Publication 463: Travel, Entertainment, Gift and Car Expenses 5 Online only $31.25 IRS Publication 550: Investment Income and Expenses 12 Online only $75.00 IRS Publication 225: Farmer's Tax Guide 12 Online only $75.00 IRS Publication 970: Tax Benefits for Education 8 Online only $50.00 Accounting and Auditing PPC's Guide to Compilation and Review Engagements $ CCH 2017 GAAP Guide (Volumes I and II) $ PPC's Guide to Preparing Financial Statements $ CCH 2017 U.S. Governmental GAAP Guide $ PPC's Guide to Audits of Nonprofit Organizations $ CCH 2017 Revenue Recognition Guide $ PPC's Guide to Audits of Nonpublic Companies $ PPC's Guide to Cash, Tax, and Other Bases of Accounting $ Special Topics Journal of Accountancy Articles (Mar 2016 Feb 2017) 4 90 $25.00 See inside back cover for pre-paid credit block discounts Instant Grading Online at asce.com All of the ASCE quizzers listed here and many more are available online. Visit asce.com for a complete list. Prices and courses are subject to change without notice. ii

5 Course No. ASC Credit Hours $ CPE Quizzer for CCH 2017 U.S. MASTER TAX GUIDE Recommended CPE Credit: 40 Hours (Tax) Prerequisite: None Recommended Study Time: 80 Hours Knowledge Level: Basic Directions: Review the reference book. Answer the 200 true/false questions below, using the combination registration form/answer sheet. Mail your completed registration form/answer sheet, along with your payment to ASCE. A Certificate of Completion will be mailed back to you, in accordance with AICPA and your State Board s Standards on Formal Self-Study CPE, when you achieve a passing grade of 70% or better. Earning CPE with ASCE is really that simple! Learning Objectives: Identify federal taxation changes that affect 2016 and 2017 individual and corporate income tax returns, Identify changes affecting income taxes for partnerships and estates and trusts. 1. For 2016, a tax rate of 15.3 percent is imposed on self-employment net earnings. [ 47] 2. For 2017, an individual over 65 who would qualify as head of household for filing status purposes must file a return if s/he has more than $13,400 of gross income. [ 101] 3. For 2016, an individual with $100,000 or more of taxable income must use Form [ 105] 4. A taxpayer may obtain an automatic 12 month extension for filing taxes by filing Form 4868 and paying an estimate of taxes due. [ 109] 5. The net investment income tax does not apply to nonresident aliens. [ 129] 6. The personal exemption amount for 2017 is $4,000. [ 135] 7. Same-sex couples in registered domestic partnerships, civil unions, and formal relationships other than marriage do not qualify to file a joint return. [ 152] 8. A corporation s shareholders cannot be trusts. [ 203] 9. Corporations that fail to pay estimated taxes will not be penalized. [ 215] 10. An affiliated corporation receiving qualifying dividends from an affiliated group member may claim a 100-percent dividends-received deduction for such dividends. [ 229] 11. Exempt-interest income is not included in determining whether earnings and profits have been accumulated beyond the reasonable needs of the business for purposes of the accumulated earnings tax. [ 253] 12. A personal holding company is subject to a 20-percent tax on its undistributed personal holding company income in addition to regular income taxes. [ 275] 13. Only one set of graduated income tax brackets is allowed for a controlled group of corporations. [ 289] 14. S corporations may not file consolidated returns. [ 295] 15. The deferral of losses on intercompany transactions is an advantage of a consolidated return. [ 297] 16. Generally, an S corporation does not pay income taxes. [ 301] 17. An S corporation can have just one class of stock outstanding. [ 305] 18. An S election that has terminated may not be reestablished without IRS consent until the fifth year following the year of revocation. [ 307] CCH 2017 U.S. Master Tax Guide (40 hours) 1

6 19. Shareholders of an S Corporation separately account for their pro rata share of corporate items in the tax year in which the corporation s tax year ends. [ 309] 20. S corporation shareholders may not claim the domestic production activities deduction. [ 312] 21. Each S corporation shareholders stock basis is increased by their portion of distributions includible in the shareholder s income. [ 317] 22. An S corporation cannot carry forward a net operating loss from a year in which it was not an S corporation. [ 319] 23. The itemized deductions of an S corporation are separately stated items that are not subject to the 2-percent floor at the shareholder level. [ 321] 24. Cash or property distributions received by a shareholder from an S Corporation are not taxable. False [ 323] 25. An S corporation generally may elect a tax year other than its required tax year if the deferral period is not more than four months. [ 355] 26. Limited partners are responsible for partnership liabilities beyond the amount of their investment. [ 401A] 27. An unincorporated organization may choose not to be treated as a partnership if the entity is used only for investment purposes. [ 402] 28. For federal income tax purposes, a state-registered limited liability company can be taxed as a partnership. [ 402B] 29. A partnership need not file Form 1065 when it does not have taxable income for the tax year. [ 406] 30. A partnership is considered technically terminated if within a 12-month period 50 percent or more of the total interests in partnership capital and profits is sold or exchanged. [ 410] 31. Innocent spouse relief is not available to partnership-level proceedings. [ 415] 32. Deductions for charitable contributions are not allowed when computing taxable income for a partnership. [ 417] 33. Any guaranteed payments made to a partner without regard to partnership income are treated as a return of capital that is not taxable to the partner. [ 421] 34. A disproportionate distribution will result in capital gain rather than ordinary income. [ 430] 35. Partnership contributions and distributions made within two years of each other are presumed to be a sale. [ 432] 36. A partnership must file an information return describing any exchanges of partnership interests involving unrealized receivables or inventory. [ 435] 37. Payments made to the successor of a deceased partner are not considered income in respect of a decedent. [ 440] 38. A limited partner generally may not be allocated recourse liabilities in excess of her/his capital contributions. [ 448] 39. Generally, no gain or loss is recognized by a partnership on a distribution of property to a partner. [ 453] 40. For tax years beginning before January 1, 2018, a partnership with 500 or more members in the preceding tax year may elect large partnership status. [ 482] 41. Trusts and decedents estates are separate taxable entities for federal income tax purposes. [ 501] 42. The income from a unit investment trust set up to hold mutual fund shares for investors is taxed directly to the investors. [ 502] 43. A liquidating trust formed to liquidate and distribute assets is taxed as an association. [ 503] 44. The taxable income of a bankruptcy estate is subject to the same tax rate as a married individual filing separately. [ 505] 45. An estate is only recognized as a taxable entity during the period of administration or settlement. [ 507] 46. Estates and trusts generally are required to make estimated quarterly tax payments. [ 511] 47. Discharge of a fiduciary terminates the fiduciary s personal liability for payment of debts of the estate without satisfying prior tax claims. [ 512] 48. Income from a trust or estate is reported on Form [ 514] CCH 2017 U.S. Master Tax Guide (40 hours) 2

7 49. The 3.8 percent net investment income tax does apply to grantor trusts. [ 517] 50. An estate s gross income is generally determined in a manner similar to that of an individual. [ 520] 51. The estate of a nonresident alien is taxed on its U.S. income, but excludes dividends and capital gains. [ 527] 52. Generally, an estate or trust may deduct reasonable amounts paid for fiduciary fees and litigation expenses only if it is engaged in a trade or business. [ 529] 53. An estate or trust cannot deduct losses from a trade or business. [ 531] 54. Interest paid or accrued in a tax year is deductible by an estate or trust. [ 533] 55. An estate can claim a personal exemption of $600. [ 534] 56. The deduction allowed to a trust or estate for distributions to beneficiaries is limited to distributable net income. [ 543] 57. The fiduciary of a complex trust can elect to treat distributions to a beneficiary made within the first 100 days of a tax year as having been distributed in the previous tax year. [ 546] 58. Unused loss carryovers and excess deductions of an estate or trust are allowed to certain beneficiaries when the estate or trust terminates. [ 556] 59. The treatment of separate shares as separate estates or trusts cannot be applied to obtain more than one deduction for the personal exception. [ 557] 60. Upon termination of an estate, unused capital loss carryover of the estate is available to the beneficiaries. [ 562] 61. There are dollar limitations on contributions to a qualified funeral trust (QFT). [ 575] 62. Retaining the power to revoke a trust will cause the trust income to be taxed to the grantor. [ 582] 63. Form 3520 must be filed by U.S. persons who are treated as owners of foreign trusts under the grantor rules. [ 588] 64. Form 8940 is used by tax-exempt organizations to request a determination regarding a change in the type of supporting organization. [ 607] 65. If an organization fails to file a notice with the IRS about its intention to claim public charity status, it will be considered a private foundation. [ 623] 66. An organization that fails the public support test for three consecutive years will be treated as a private foundation as of the beginning of the third year of failure. [ 631] 67. Net investment income of private foundations is subject to a two-percent excise tax. [ 633] 68. A private foundation generally must distribute 3 percent of its net investment assets annually. [ 637] 69. Private foundations are subject to a termination tax. [ 649] 70. Generally, a social club is tax-exempt only if it is supported entirely by membership fees, dues, and assessments. [ 692] 71. Severance pay is considered taxable compensation. [ 713] 72. Several U.S. Courts of Appeal view salary payments to a deceased employee s surviving spouse as tax-free gifts, while the IRS and Tax Court view them as taxable income. [ 719] 73. In order for a dividend to be taxable income to a shareholder, the distribution must be made from the distributing corporation s earnings and profits. [ 747] 74. Alimony is deductible only if the taxpayer itemizes her/his deductions. [ 771] 75. Income earned from a hobby is taxable, and related expenses are generally unlimited. [ 785] 76. Income flow from property acquired by bequest, devise, or inheritance is excludable from gross income. [ 847] 77. Qualified disaster relief payments must be included in the victim s gross income. [ 887] 78. Pension amounts received for personal injuries resulting from combat-related armed forces service are excludable from gross income. [ 891] CCH 2017 U.S. Master Tax Guide (40 hours) 3

8 79. Business gift deductions are limited to $50 per recipient per year. [ 918] 80. A length of service award given to an employee within her/his first five years is not deductible by the employer. [ 919] 81. A $10 million limit applies to the deduction of interest incurred annually on debt used by a corporation to acquire stock or two-thirds of another corporation s operating assets. [ 937] 82. A taxpayer who works in two places in one day may not deduct the commuting expenses for getting from the first place to the second. [ 945] 83. The standard mileage rate for business travel is 54 cents per mile for [ 947] 84. Even though an advertising program may extend over several years, the cost is deductible when paid or incurred. [ 969] 85. Medical expenses paid by credit card qualify as medical expenses in the year the expenses were charged. [ 1015] 86. Generally, assessments for streets and sidewalks are fully deductible by the property owners. [ 1026] 87. Employees and self-employed individuals who move to start work in a new location may deduct the reasonable expenses of moving as an above-the-line deduction. [ 1073] 88. Taxpayers who are union members may not deduct membership costs such as union dues. [ 1080] 89. Losses sustained during demolition of buildings may be deducted by the taxpayer. [ 1105] 90. Professional gamblers may deduct gambling losses as an adjustment to gross income. [ 1113] 91. Business bad debts can generally be deducted as an ordinary loss when and to the extent they become totally worthless. [ 1135] 92. A three-year net operating loss carryback period applies to both farming and qualified disaster losses. [ 1151] 93. The passive activity loss rules do not apply to closely held C corporations. [ 1173] 94. If more than 75 percent of a closely held corporation s annual gross receipts are from real property trades or businesses in which it materially participates, it qualifies as a real estate professional for purposes of the passive activity loss rules. [ 1185] 95. The maximum amount that may be expensed under IRC 179 for the cost of a new SUV is $25,000. [ 1214] 96. The Modified Accelerated Cost Recovery System must be used for depreciation for most tangible property placed into service after [ 1216] 97. Components and improvements placed in service after 1986 must be depreciated using MACRS unless the building is not MACRS property. [ 1267] 98. Patents and copyrights are section 197 intangible assets and will be amortized over a 15-year period. [ 1288] 99. Form 8880 is used to calculate the retirement savings contributions credit. [ 1304] 100. A taxpayer may deduct foreign income taxes paid or accrued as an itemized deduction, or s/he may claim them as a credit against her/his U.S. income tax liability. [ 1361] 101. Estates and trusts are not subject to the Alternative Minimum Tax Liability. [ 1401] 102. A small corporation is not exempt from alternative minimum taxes (AMT). [ 1415] 103. An individual taxpayer is not allowed to claim personal exemption deductions for AMT purposes. [ 1435] 104. The AMT does not apply to partnerships. [ 1455] 105. Bank maintained common trust funds must use the calendar year as their tax year. [ 1501] 106. A short period return is a tax return for a period of less than six months. [ 1505] 107. In order to correct the use of an improper tax year, a taxpayer may file Form 1128 and an amended tax return prepared on the calendar year basis. [ 1513] 108. Any change in the method of inventory valuation is considered a change in accounting method. [ 1529] CCH 2017 U.S. Master Tax Guide (40 hours) 4

9 109. Real property held for sale, capital assets, equipment, accounts, notes, investments, and similar assets may not be inventoried. [ 1557] 110. A taxpayer is required to obtain advance permission from the IRS to use the LIFO method. [ 1565] 111. Taxes paid on the acquisition of property are treated as part of the cost of the property. [ 1611] 112. The basis of property inherited from a decedent is generally the property s fair market value on the date of death or the alternate valuation or special use valuation date. [ 1633] 113. A taxpayer takes a fair market value basis in property acquired in a tax-free exchange. [ 1651] 114. For securities traded on the open market, the fair market value is ordinarily the average of the high and low quoted prices on the valuation date. [ 1697] 115. Married taxpayers filing jointly may exclude from gross income up to $500,000 of gain realized on the sale of a principal residence. [ 1705] 116. Under IRC 1035, the exchange of two life insurance contracts does not trigger gain or loss. [ 1724] 117. If a person transfers property to a corporation solely in exchange for stock and, immediately after the transfer, is in control of the transferee corporation, gain or loss must be recognized. [ 1731] 118. The capital gains rate on net capital gains and qualified dividend income for an individual is 0 percent if s/he is in the 10- or 15-percent income tax brackets. [ 1736] 119. S corporations are treated as real estate dealers if they subdivide a tract of land for sale. [ 1762] 120. Amounts paid for the transfer of a franchise, trademark, or trade name are amortized over 20 years. [ 1774] 121. Depreciation recapture is never required when depreciable property is involuntarily converted. [ 1779] 122. Property placed in service after and before 1987 is generally subject to MACRS. [ 1780] 123. The installment method is a way of reporting losses from sales of property when at least one payment is received in a tax year after the year of sale. [ 1801] 124. A real or personal property dealer generally cannot report gain from dealer dispositions under the installment method. [ 1808] 125. A special interest charge applies to certain nondealer installment sales of property over $75,000. [ 1813] 126. The installment method generally may not be used for a sale of depreciable property to a related person. [ 1835] 127. The mark-to-market rules generally apply to all securities held as inventory by a broker/dealer. [ 1903] 128. A security that becomes worthless during the tax year will be treated as exchanged or sold on the first day of the tax year. [ 1916] 129. Stock options used as an employee incentive plan must be granted within five years of the date the plan was adopted. [ 1927] 130. An employee stock purchase plan cannot grant options to an employee who already owns more than 2 percent of the voting power/value of the employer s stock. [ 1931] 131. A short sale is a transaction in which the taxpayer sells property at a loss. [ 1944] 132. Mark-to-market rules do not apply to hedging transactions that are part of a mixed straddle if an election is made to exclude them from such treatment. [ 1948] 133. Hedging transactions generally result in capital gain or loss. [ 1949] 134. Dealers in tax-exempt obligations must amortize premiums as if the interest had been taxable. [ 1970] 135. In an established stock exchange transaction, a cash-basis taxpayer realizes gain or loss on the settlement date, not on the trade date. [ 1973] 136. A securities broker/dealer may treat the payment of commissions as an ordinary and necessary cost of doing business. [ 1983] CCH 2017 U.S. Master Tax Guide (40 hours) 5

10 137. A full-time employee for purposes of the employer health insurance mandate is an employee who works at least 30 hours of service per week or 130 hours in a calendar month. [ 2001] 138. An assessable payment (shared responsibility payment) paid by an employer offering health care coverage is deductible as a business expense. [ 2005] 139. Same-sex spouses are considered married for federal tax purposes only if they live in a state that recognizes such marriages. [ 2015] 140. The maximum amount allowed to be contributed to a health flexible spending account for 2017 is $3,550. [ 2041] 141. Elections for cafeteria plans must be made before the beginning of the plan year. [ 2045] 142. No-additional-cost services provided to employees free of charge are excludable from the employee s income if the services are available to employees on a nondiscriminatory basis. [ 2087] 143. An employer with 5,000 or fewer employees may combine a defined benefit plan with a 401(k) plan. [ 2105] 144. The maximum catch-up contribution to an IRC 401(k), 403(b), and 457 plans is $3,000 for [ 2121] 145. Generally, all types of qualified retirement plans must satisfy a minimum distribution requirement by April 1 of the calendar year following the calendar year in which the participant retires or reaches age 70-1/2, whichever is later. [ 2127] 146. An individual who fails to take her/his required minimum distributions is subject to a 25-percent excise tax on the amount that should have been distributed. [ 2127] 147. A qualified retirement plan generally must provide detailed information on Form 5500 every year. [ 2137] 148. A penalty of 10 percent generally applies to early distributions from a retirement plan. [ 2151] 149. Elections for cafeteria plans must be made before the beginning of the plan year. [ 2152] 150. Calendar year taxpayers generally have until April 15 of the following year to make contributions to their IRAs for the tax year. [ 2155] 151. Excess contributions to an IRA are subject to a cumulative 6-percent excise tax. [ 2161] 152. IRA distributions up to $100,000 may be made to certain charitable organizations tax-free if the participant is 70 ½ or older. [ 2165] 153. Losses on investments in Roth IRAs are not deductible. [ 2171] 154. Qualified distributions from a Roth IRA are not subject to income tax or the additional tax for early withdrawal. [ 2173] 155. Form 2169 is used to report distributions from Roth IRAs. [ 2173] 156. An individual can recharacterize a contribution originally made to a traditional IRA as a Roth IRA contribution, or vice versa, if certain conditions are met. [ 2177] 157. Employee contributions to a SIMPLE IRA under a salary reduction agreement are limited to $12,500 for [ 2183] 158. Distributions from a simplified employee pension (SEP) are taxed under the same rules as traditional IRAs. [ 2189] 159. Under a 403(b) annuity plan, the employee s rights in the annuity must generally be nonforfeitable. [ 2191] 160. A Type G reorganization is a change in the identity, form, or place of the organization of one corporation. [ 2209] 161. To qualify as a recapitalization, a transaction must include a reshuffling of the capital structure of the corporation. [ 2225] 162. Form 966 must be filed by a liquidating corporation within 60 days of adopting a plan of liquidation. [ 2259] 163. Carrybacks of net operating losses and net capital losses are permitted in any type of reorganization. [ 2277] 164. Mutual funds may avoid corporate taxation because they are entitled a deduction for dividends paid. [ 2301] 165. Tax-exempt interest cannot be paid to the shareholders of mutual funds. [ 2307] CCH 2017 U.S. Master Tax Guide (40 hours) 6

11 166. Foreign corporations are eligible to be real estate investment trusts (REITs). [ 2326] 167. Net operating losses of a real estate investment trust (REIT) may only be carried back. [ 2329] 168. A real estate mortgage investment conduit (REMIC) is subject to income taxation. [ 2343] 169. A taxable mortgage pool may not file a consolidated return with any other corporation. [ 2368] 170. Net capital gains of a life insurance company generally are taxed at a rate of 35 percent. [ 2370] 171. A life insurance company cannot claim a deduction for dividends paid to policyholders during the tax year. [ 2373] 172. Banks are not subject to the capital loss limitations with respect to the worthlessness of debt securities; they may treat them as bad debts. [ 2383] 173. For 2017, a qualifying U.S. citizen who works abroad generally may exclude up to $14,294 of foreign housing expenses. [ 2403] 174. A person cannot be both a resident alien and a nonresident alien during a tax year. [ 2411] 175. A 30-percent branch profits tax may apply to a foreign corporation that operates a trade or business in the United States. [ 2433] 176. A non-resident alien is subject to U.S. income tax on income connected effectively with a U.S. trade or business. [ 2446] 177. All U.S. source income paid to a foreign individual is subject to a 40-percent withholding rate. [ 2455] 178. A U.S. person must disclose any financial interest in a foreign bank account, securities account, or other financial account electronically on FinCEN Form 114 if the aggregate value of the accounts exceeds $20,000 at any time during the calendar year. [ 2465] 179. A corporation must file Form 1116 to claim the foreign tax credit. [ 2476] 180. An individual with up to $300 of creditable foreign taxes is exempt from the overall foreign tax credit limitation if s/he has no foreign source income other than qualified passive income and s/he elects the de minimis exemption directly on Form [ 2479] 181. Generally, employers who withhold taxes from their employees must file Form 941 on a quarterly basis. [ 2501] 182. A trust is required to file a tax return by the fifteenth day of the fourth month following the close of the tax year. [ 2505] 183. An S corporation can obtain a nine-month extension of the time to file its tax return by filing Form [ 2509] 184. A tax return preparer is subject to a $510 penalty if s/he endorses or negotiates a taxpayer s refund check. [ 2518] 185. An individual should use Form 1040-V to pay the balance due on her/his Form [ 2525] 186. The IRS accepts income taxes paid by Discover credit cards. [ 2545] 187. Form 1098 is filed with the IRS if $600 or more in mortgage interest is received from an individual in the course of a trade or business. [ 2565] 188. If an employer fails to withhold income taxes from an employee s wages, the employer will be held liable for the amount not withheld. [ 2601] 189. Amounts paid to an employee under an accountable plan are required to be reported on the employee s Form W-2. [ 2607] 190. Wages paid to household employees are exempt from income tax withholding. [ 2609] 191. An individual may be subject to a $500 civil penalty for claiming excess withholding allowances on Form W-4. [ 2634] 192. Form 945 is used to report back-up withholding. [ 2645] 193. The additional 0.9-percent Medicare tax applies to wages in excess of $250,000 for a single individual. [ 2648] 194. Employers are required to withhold and pay FICA taxes on any wages paid to domestic workers. [ 2652] CCH 2017 U.S. Master Tax Guide (40 hours) 7

12 195. No self-employment tax is due if net earnings from self-employment are less than $400. [ 2664] 196. A taxpayer generally has 90 days after a notice of deficiency is mailed to file a petition with the Tax Court for a redetermination of her/his tax deficiency. [ 2711] 197. A $5,000 penalty is imposed on a person who files a frivolous return. [ 2811] 198. The IRS is not required to abate penalties that result from a taxpayer s reliance on incorrect advice provided by the Service. [ 2813] 199. A 30-percent accuracy-related penalty applies to the portion of an underpayment of tax attributable to negligence. [ 2854] 200. The annual exclusion for a gift to a donor s spouse who is not a U.S. citizen is $148,000 for [ 2905] CCH 2017 U.S. Master Tax Guide (40 hours) 8

13 Course No. ASC Credit Hours $ CPE Quizzer for CCH 2017 U.S. MASTER TAX GUIDE Recommended CPE Credit: 24 Hours (Tax) Prerequisite: None Recommended Study Time: 48 Hours Knowledge Level: Basic Directions: Review the reference book. Answer the 120 true/false questions below, using the combination registration form/answer sheet. Mail your completed registration form/answer sheet, along with your payment to ASCE. A Certificate of Completion will be mailed back to you, in accordance with AICPA and your State Board s Standards on Formal Self-Study CPE, when you achieve a passing grade of 70% or better. Earning CPE with ASCE is really that simple! Learning Objectives: Identify federal taxation changes that affect 2016 and 2017 individual and corporate income tax returns, Identify changes affecting income taxes for partnerships and estates and trusts. 1. For 2016, a tax rate of 15.3 percent is imposed on self-employment net earnings. [ 47] 2. For 2017, an individual over 65 who would qualify as head of household for filing status purposes must file a return if s/he has more than $13,400 of gross income. [ 101] 3. For 2016, an individual with $100,000 or more of taxable income must use Form [ 105] 4. The net investment income tax does not apply to nonresident aliens. [ 129] 5. Same-sex couples in registered domestic partnerships, civil unions, and formal relationships other than marriage do not qualify to file a joint return. [ 152] 6. A corporation s shareholders cannot be trusts. [ 203] 7. Exempt-interest income is not included in determining whether earnings and profits have been accumulated beyond the reasonable needs of the business for purposes of the accumulated earnings tax. [ 253] 8. Only one set of graduated income tax brackets is allowed for a controlled group of corporations. [ 289] 9. Generally, an S corporation does not pay income taxes. [ 301]] 10. An S election that has terminated may not be reestablished without IRS consent until the fifth year following the year of revocation. [ 307] 11. Shareholders of an S Corporation separately account for their pro rata share of corporate items in the tax year in which the corporation s tax year ends. [ 309] 12. S corporation shareholders may not claim the domestic production activities deduction. [ 312] 13. An S corporation cannot carry forward a net operating loss from a year in which it was not an S corporation. [ 319] 14. Cash or property distributions received by a shareholder from an S Corporation are not taxable. [ 323] 15. Limited partners are responsible for partnership liabilities beyond the amount of their investment. [ 401A] 16. An unincorporated organization may choose not to be treated as a partnership if the entity is used only for investment purposes. [ 402] 17. For federal income tax purposes, a state-registered limited liability company can be taxed as a partnership. [ 402B] 18. Innocent spouse relief is not available to partnership-level proceedings. [ 415] 19. Any guaranteed payments made to a partner without regard to partnership income are treated as a return of capital that is not taxable to the partner. [ 421] 20. A disproportionate distribution will result in capital gain rather than ordinary income. [ 430] 21. A partnership must file an information return describing any exchanges of partnership interests involving unrealized receivables or inventory. [ 435] CCH 2017 U.S. Master Tax Guide (24 hours) 9

14 22. Payments made to the successor of a deceased partner are not considered income in respect of a decedent. [ 440] 23. Generally, no gain or loss is recognized by a partnership on a distribution of property to a partner. [ 453] 24. For tax years beginning before January 1, 2018, A partnership with 500 or more members in the preceding tax year may elect large partnership status.. [ 482] 25. Trusts and decedents estates are separate taxable entities for federal income tax purposes. [ 501] 26. A liquidating trust formed to liquidate and distribute assets is taxed as an association. [ 503] 27. The taxable income of a bankruptcy estate is subject to the same tax rate as a married individual filing separately. [ 505] 28. Discharge of a fiduciary terminates the fiduciary s personal liability for payment of debts of the estate without satisfying prior tax claims. [ 512] 29. Income from a trust or estate is reported on Form [ 514] 30. The 3.8 percent net investment income tax does apply to grantor trusts. [ 517] 31. An estate s gross income is generally determined in a manner similar to that of an individual. [ 520] 32. Generally, an estate or trust may deduct reasonable amounts paid for fiduciary fees and litigation expenses only if it is engaged in a trade or business. [ 529] 33. The deduction allowed to a trust or estate for distributions to beneficiaries is limited to distributable net income. [ 543] 34. The fiduciary of a complex trust can elect to treat distributions to a beneficiary made within the first 100 days of a tax year as having been distributed in the previous tax year. [ 546] 35. Unused loss carryovers and excess deductions of an estate or trust are allowed to certain beneficiaries when the estate or trust terminates. [ 556] 36. The treatment of separate shares as separate estates or trusts cannot be applied to obtain more than one deduction for the personal exception. [ 557] 37. There are dollar limitations on contributions to a qualified funeral trust (QFT). [ 575] 38. Retaining the power to revoke a trust will cause the trust income to be taxed to the grantor. [ 582] 39. Form 3520 must be filed by U.S. persons who are treated as owners of foreign trusts under the grantor rules. [ 588] 40. Form 8940 is used by tax-exempt organizations to request a determination regarding a change in the type of supporting organization. [ 607] 41. If an organization fails to file a notice with the IRS about its intention to claim public charity status, it will be considered a private foundation. [ 623] 42. Private foundations are subject to a termination tax. [ 649]. 43. Several U.S. Courts of Appeal view salary payments to a deceased employee s surviving spouse as tax-free gifts, while the IRS and Tax Court view them as taxable income. [ 719] 44. Alimony is deductible only if the taxpayer itemizes her/his deductions. [ 771] 45. Income earned from a hobby is taxable, and related expenses are generally unlimited. [ 785] 46. Income flow from property acquired by bequest, devise, or inheritance is excludable from gross income. [ 847] 47. Qualified disaster relief payments must be included in the victim s gross income. [ 887] 48. A length of service award given to an employee within her/his first five years is not deductible by the employer. [ 919] 49. A $10 million limit applies to the deduction of interest incurred annually on debt used by a corporation to acquire stock or two-thirds of another corporation s operating assets. [ 937] 50. A taxpayer who works in two places in one day may not deduct the commuting expenses for getting from the first place to the second. [ 945] 51. The standard mileage rate for business travel is 54 cents per mile for [ 947] 52. Medical expenses paid by credit card qualify as medical expenses in the year the expenses were charged. [ 1015] 53. Employees and self-employed individuals who move to start work in a new location may deduct the reasonable expenses of moving as an above-the-line deduction. [ 1073] 54. Taxpayers who are union members may not deduct membership costs such as union dues. [ 1080] CCH 2017 U.S. Master Tax Guide (24 hours) 10

15 55. Business bad debts can generally be deducted as an ordinary loss when and to the extent they become totally worthless. [ 1135] 56. The passive activity loss rules do not apply to closely held C corporations. [ 1173] 57. If more than 75 percent of a closely held corporation s annual gross receipts are from real property trades or businesses in which it materially participates, it qualifies as a real estate professional for purposes of the passive activity loss rules. [ 1185] 58. Patents and copyrights are section 197 intangible assets and will be amortized over a 15-year period. [ 1288] 59. Form 8880 is used to calculate the retirement savings contributions credit. [ 1304] 60. A taxpayer may deduct foreign income taxes paid or accrued as an itemized deduction, or s/he may claim them as a credit against her/his U.S. income tax liability. [ 1361] 61. A small corporation is not exempt from alternative minimum taxes (AMT). [ 1415] 62. The AMT does not apply to partnerships. [ 1455] 63. Bank maintained common trust funds must use the calendar year as their tax year. [ 1501] 64. A short period return is a tax return for a period of less than six months. [ 1505] 65. In order to correct the use of an improper tax year, a taxpayer may file Form 1128 and an amended tax return prepared on the calendar year basis. [ 1513] 66. Real property held for sale, capital assets, equipment, accounts, notes, investments, and similar assets may not be inventoried. [ 1557] 67. The basis of property inherited from a decedent is generally the property s fair market value on the date of death or the alternate valuation or special use valuation date. [ 1633] 68. A taxpayer takes a fair market value basis in property acquired in a tax-free exchange. [ 1651] 69. For securities traded on the open market, the fair market value is ordinarily the average of the high and low quoted prices on the valuation date. [ 1697] 70. Under IRC 1035, the exchange of two life insurance contracts does not trigger gain or loss. [ 1724] 71. If a person transfers property to a corporation solely in exchange for stock and, immediately after the transfer, is in control of the transferee corporation, gain or loss must be recognized. [ 1731] 72. The capital gains rate on net capital gains and qualified dividend income for an individual is 0 percent if s/he is in the 10- or 15-percent income tax brackets. [ 1736] 73. Amounts paid for the transfer of a franchise, trademark, or trade name are amortized over 20 years. [ 1774] 74. Depreciation recapture is never required when depreciable property is involuntarily converted. [ 1780] 75. A real or personal property dealer generally cannot report gain from dealer dispositions under the installment method. [ 1808] 76. The installment method generally may not be used for a sale of depreciable property to a related person. [ 1835] 77. Stock options used as an employee incentive plan must be granted within five years of the date the plan was adopted. [ 1927] 78. An employee stock purchase plan cannot grant options to an employee who already owns more than 2 percent of the voting power/value of the employer s stock. [ 1931] 79. In an established stock exchange transaction, a cash-basis taxpayer realizes gain or loss on the settlement date, not on the trade date. [ 1973] 80. A securities broker/dealer may treat the payment of commissions as an ordinary and necessary cost of doing business. [ 1983] 81. A full-time employee for purposes of the employer health insurance mandate is an employee who works at least 30 hours of service per week or 130 hours in a calendar month. [ 2001] 82. An assessable payment (shared responsibility payment) paid by an employer offering health care coverage is deductible as a business expense. [ 2005] 83. Same-sex spouses are considered married for federal tax purposes only if they live in a state that recognizes such marriages. [ 2015] 84. The maximum amount allowed to be contributed to a health flexible spending account for 2017 is $3,550. [ 2041] 85. Elections for cafeteria plans must be made before the beginning of the plan year. [ 2045] CCH 2017 U.S. Master Tax Guide (24 hours) 11

16 86. No-additional-cost services provided to employees free of charge are excludable from the employee s income if the services are available to employees on a nondiscriminatory basis. [ 2087] 87. The maximum catch-up contribution to an IRC 401(k), 403(b), and 457 plans is $3,000 for [ 2121] 88. Generally, all types of qualified retirement plans must satisfy a minimum distribution requirement by April 1 of the calendar year following the calendar year in which the participant retires or reaches age 70-1/2, whichever is later. [ 2127] 89. An individual who fails to take her/his required minimum distributions is subject to a 25-percent excise tax on the amount that should have been distributed. [ 2127] 90. Elections for cafeteria plans must be made before the beginning of the plan year. [ 2152] 91. Calendar year taxpayers generally have until April 15 (or their tax return due date) of the following year to make contributions to their IRAs for the tax year. [ 2155] 92. Excess contributions to an IRA are subject to a cumulative 6-percent excise tax. [ 2161] 93. Losses on investments in Roth IRAs are not deductible. [ 2171] 94. An individual can recharacterize a contribution originally made to a traditional IRA as a Roth IRA contribution, or vice versa, if certain conditions are met. [ 2177] 95. Distributions from a simplified employee pension (SEP) are taxed under the same rules as traditional IRAs. [ 2189] 96. Under a 403(b) annuity plan, the employee s rights in the annuity must generally be nonforfeitable. [ 2191] 97. A Type G reorganization is a change in the identity, form, or place of the organization of one corporation. [ 2209] 98. Form 966 must be filed by a liquidating corporation within 60 days of adopting a plan of liquidation. [ 2259] 99. Carrybacks of net operating losses and net capital losses are permitted in any type of reorganization. [ 2277] 100. Mutual funds may avoid corporate taxation because they are entitled a deduction for dividends paid. [ 2301] 101. Net operating losses of a real estate investment trust (REIT) may only be carried back. [ 2329] 102. A real estate mortgage investment conduit (REMIC) is subject to income taxation. [ 2343] 103. Net capital gains of a life insurance company generally are taxed at a rate of 35%. [ 2370] 104. Banks are not subject to the capital loss limitations with respect to the worthlessness of debt securities; they may treat them as bad debts. [ 2383] 105. For 2017, a qualifying U.S. citizen who works abroad generally may exclude up to $14,294 of foreign housing expenses. [ 2403] 106. A 30-percent branch profits tax may apply to a foreign corporation that operates a trade or business in the United States. [ 2433] 107. A nonresident alien is subject to U.S. income tax on income connected effectively with a U.S. trade or business. [ 2446] 108. A U.S. person must disclose any financial interest in a foreign bank account, securities account, or other financial account electronically on FinCEN Form 114 if the aggregate value of the accounts exceeds $20,000 at any time during the calendar year. [ 2465] 109. An individual with up to $300 of creditable foreign taxes is exempt from the overall foreign tax credit limitation if s/he has no foreign source income other than qualified passive income and s/he elects the de minimis exemption directly on Form [ 2479] 110. A trust is required to file a tax return by the fifteenth day of the fourth month following the close of the tax year. [ 2505] 111. An S corporation can obtain a nine-month extension of the time to file its tax return by filing Form [ 2509] 112. A tax return preparer is subject to a $510 penalty if s/he endorses or negotiates a taxpayer s refund check. [ 2518] 113. Form 1098 is filed with the IRS if $600 or more in mortgage interest is received from an individual in the course of a trade or business. [ 2565] 114. If an employer fails to withhold income taxes from an employee s wages, the employer will be held liable for the amount not withheld. [ 2601] 115. Amounts paid to an employee under an accountable plan are required to be reported on the employee s Form W-2. [ 2607] CCH 2017 U.S. Master Tax Guide (24 hours) 12

17 116. An individual may be subject to a $500 civil penalty for claiming excess withholding allowances on Form W-4. [ 2634] 117. The additional 0.9-percent Medicare tax applies to wages in excess of $250,000 for a single individual. [ 2648] 118. Employers are required to withhold and pay FICA taxes on any wages paid to domestic workers. [ 2652] 119. A taxpayer generally has 90 days after a notice of deficiency is mailed to file a petition with the Tax Court for a redetermination of her/his tax deficiency. [ 2711] 120. A 30-percent accuracy-related penalty applies to the portion of an underpayment of tax attributable to negligence. [ 2854] CCH 2017 U.S. Master Tax Guide (24 hours) 13

18 Course No. ASC Credit Hours $ CPE Quizzer for RIA 2017 FEDERAL TAX HANDBOOK Recommended CPE Credit: 40 Hours (Tax) Prerequisite: None Recommended Study Time: 80 Hours Knowledge Level: Basic Directions: Review the reference book. Answer the 200 true/false questions below, using the combination registration form/answer sheet. Mail your completed registration form/answer sheet, along with your payment to ASCE. A Certificate of Completion will be mailed back to you, in accordance with AICPA and your State Board s Standards on Formal Self-Study CPE, when you achieve a passing grade of 70% or better. Earning CPE with ASCE is really that simple! Learning Objectives: Identify federal taxation changes that affect 2016 and 2017 returns Determine changes affecting income taxes for partnerships and corporations Identify federal income tax requirements for estates and trusts 1. The marginal tax rate for 2016 is 39.6 percent for a single taxpayer whose taxable income is over $415,050 or for a married couple filing jointly whose taxable income is over $466,950. [ 1102, 1103] 2. The 2017 income tax rate for trusts with income under $2,550 is 18%. [ 1106] 3. Certain unearned income of individuals, trusts, and estates is subject to a 3.8% surtax. [ 1107] 4. The OASDI tax rate imposed on self-employed individuals on the first $118,500 of self-employment income is 12.4% for [ 1109] 5. Income from the sale of illegal drugs is excluded from gross income. [ 1200] 6. If there is a possibility that it may have to be repaid in a later year, income received without restriction need not be reported in the year received. [ 1204] 7. Electronic health record incentive payments made to health care professionals for using patients electronic health records are taxable. [ 1206] 8. Qualified disaster relief payments must be included in gross income and may be subject to self-employment taxes. [ 1207] 9. There are some limited exceptions whereby compensation for specific personal services may be excluded from gross income. [ 1208] 10. Rental allowance paid to a member of the clergy as compensation may be excluded from the minister s gross income. [ 1226] 11. The cents-per-mile valuation method is not allowed for 2016 if the fair market value of the employer-provided auto exceeds $15,900. [ 1236] 12. Employer-provided airline flights for an employee s personal purposes are nontaxable fringe benefits. [ 1238] 13. No-additional-cost services are included in an employee s gross income. [ 1243] 14. Working condition fringes must be included in an employee s gross income. [ 1245] 15. An employer s reimbursement of qualified moving expenses is excluded from an employee s gross income. [ 1248] 16. An employee is not taxed on employer-paid group-term life insurance premiums if total coverage is more than $50,000 but less than $100,000. [ 1262] RIA 2017 Federal Tax Handbook (40 hours) 14