Supplementary Study Packet to Accompany the Quarterly CPE Exam on Topics Addressed in the Journal of Accountancy Third Quarter (July September), 2015

Transcription

1 Supplementary Study Packet to Accompany the Quarterly CPE Exam on Topics Addressed in the Journal of Accountancy Third Quarter (July September), 2015 Instructions: Before you start a section of the CPE Final Exam, complete the corresponding section of this Supplementary Study Packet. Do NOT submit answers to the Review Questions. Purpose: To provide an interactive learning experience by listing Learning Objectives and Review Questions with Suggested Answers and Explanations. OUTLINE: The section numbers of Study Packet correspond to section numbers of the Final Exam. The page numbers below refer to the first page of each article in the printed version of the JoA. Sections I IV Relate to the Journal of Accountancy of July 2015: Section I. Two Not-for-Profit Articles: Not-for-Profit Financial Reporting Headed for a Change (Page 42) Direct-Method Transition Would Require Prompt Attention (Page 46) Section II. Tax Treatment of Employer-Provided Meals and Lodging (Page 48) Section III. Financing for College with the Uniform Transfer to Minors Act (Page 56) Section IV. Transfer Taxes: 5 Questions To Ask Clients with International Ties (Page 62) Sections V VII Relate to the Journal of Accountancy of August 2015: Section V. Two Fraud Articles: What's Your Fraud IQ? (Page 24) Forensic Interviews: Plan to Succeed (Page 34) Section VI. Two Tax Articles: Moved South But Still Taxed Up North (Page 58) Tax Treatment of Drug Development Company Startup Costs (Page 62) Section VII. Tax Columns: From The Tax Adviser (Page 68), Tax Practice Corner (Page 70), Tax Matters (Page 72) Sections VIII X Relate to the Journal of Accountancy of September 2015 Section VIII Tax Software Survey (Page 24) Section IX Three Auditing Articles: How To Rate External Auditors (Page 20) Succeeding with a Narrow Focus (Page 56) How to Perform High-Quality EBP Audits (Page 60) Section X. Three Tax Columns: From The Tax Adviser (Page 76), Tax Practice Corner (Page 78), and Tax Matters (Page 82)

2 The course objectives are stated in each of the following sections. Section I. Two Not-for-Profit Financial Reporting Articles: Not-for-Profit Financial Reporting Headed for a Change (Page 42 of July JoA) Direct-Method Transition Would Require Prompt Attention (Page 46 of July JoA) Section I Assignment: 1. Study the article (reference text) in the Journal of Accountancy, paying particular attention to our course objectives stated below. 2. Answer our Review Questions that have been designed to provide an interactive learning experience. 3. Study the Solutions and Suggested Responses to the Review Questions. 4. Answer Final Exam questions 1 through 5. Section I Course Objectives: 1. To describe the basic requirements of the FASB's proposed Accounting Standards Update Notfor-Profit Entities (Topic 958) and Health Care Entities (Topic 954): Presentation of Financial Statements for Not-for-Profit Entities. 2. To describe the effect of the FASB's proposal on the statement of financial position, the statement of activities and the statement of cash flows. Section I Review Questions: 1. The goal of the FASB's proposal is to provide better information about a not-for-profit's: a. Liquidity. d. A, b and c. b. Financial position. e. A and b but not c. c. Cash flows. 2. Existing GAAP prescribe a specific way of reporting operating performance. a. Does b. Does not 3. The FASB's proposal calls for the use of the method for preparing cash flow statements for not-for-profit entities. a. Direct b. Indirect c. Either a or b 4. The FASB's proposal calls for categories of activities in the statement of activities. a. Two b. Three c. Four d. Five 5. The FASB's proposal requires the disclosure of information about liquidity of assets and near-term demands for cash as of the reporting date. a. Quantitative b. Qualitative c. Both a and b d. Neither a nor b Section I Solutions and Suggested Responses to Review Questions follow on next page.

3 Section I. Solutions and Suggested Responses to Review Questions: Review Question 1. (Please see page 43 of July JoA.) a. Incorrect. This is part of the correct answer but not the entire answer. b. Incorrect. This is part of the correct answer but not the entire answer. c. Incorrect. This is part of the correct answer but not the entire answer. d. Correct. The goal of the FASB's proposal is to provide better information about all three. e. Incorrect. According to the FASB, each of the three areas needs better information. Review Question 2. (Please see page 43 of July JoA.) a. Correct. According to the FASB, this is why the proposal is needed. b. Incorrect. The fact that existing GAAP does not prescribe a specific way of reporting operating performance leads to confusion and inconsistencies in evaluating performance. Review Question 3. (Please see pages of July JoA.) a. Correct. The proposal clearly calls for the use of only one method: the direct method. b. Incorrect. Under the FASB's proposal, the indirect method for reporting cash flows will not be permitted. c. Incorrect. The direct method will be required; the indirect method will not be permitted. Review Question 4. (Please see page 45 of July JoA.) a. Incorrect. The FASB's proposal calls for no change in the number of categories but is calling for a realignment of several items among operating, financing and investing categories. b. Correct. The FASB's proposal calls for no change in the number of categories but is calling for a realignment of several items among operating, financing and investing categories. c. Incorrect. The FASB's proposal calls for no change in the number of categories but is calling for a realignment of several items among operating, financing and investing categories. d. Incorrect. The FASB's proposal calls for no change in the number of categories but is calling for a realignment of several items among operating, financing and investing categories. Review Question 5. (Please see page 47 of July JoA.) a. Incorrect. This is part of but not the entire answer. b. Incorrect. This is part of but not the entire answer. c. Correct. The proposal calls for the disclosure of both quantitative as well as qualitative information. The FASB wants more commentary explaining liquidity or lack of liquidity of a not-for-profit entity. d. Incorrect. The proposal calls for not only quantitative information but also qualitative information. Reminder: After you complete each section of the Study Packet, proceed to the final exam (the CPE Exam ) and answer the matching section's exam questions. =================================== End of Section I REFERRAL INCENTIVE PROGRAM - WE LL PAY YOU FOR REFERRING NEW QUALIFYING CUSTOMERS: Receive $10 for each new customer you refer to us. For every new qualifying customer who pays for an exam and mentions your name, we ll send you a check for $10. It s as simple as that. We welcome any questions by either phone or .

4 Section II. Tax Treatment of Employer-Provided Meals and Lodging (Page 48 of July JoA) Section II Assignment: 1. Study the article (reference text) in the Journal of Accountancy, paying particular attention to our course objectives stated below. 2. Answer our Review Questions that have been designed to provide an interactive learning experience. 3. Study the Solutions and Suggested Responses to the Review Questions. 4. Answer Final Exam questions 6 through 10. Section II Course Objectives: 1. To describe the tax treatment of employer-provided meals and lodging. 2. To describe the two requirements that are critical to excluding employer-provided meals and lodging from employees' gross income. Section II Review Questions: 1. To meet the Sec. 119(a) exclusion requirements, the meals must meet which of the following tests? a. That the meals are being provided on employer's premises. b. That the meals are being provided for the convenience of the employer. 2. Assume that a large medical center has an on-site dining room where all of its employees are provided free meals because they must be available for emergencies. The employees may exclude % of the value of the meals from gross income. a. 0 b. 25 c. 75 d As a convenience to its employees, assume that a bank provides a dining room where employees may purchase meals at a 40% discount from fair market value. Employees are not required to eat in the dining room. The bank's accounting system reported total discounts of $500 on one specific employee's W-2. That employee must include in gross taxable income. a. $200 b. $300 c. $400 d. $ Section 119 applies to: a. Meals provided by an employer in kind. b. Cash meal allowance. 5. Sec. 119(d) provides that employees of an educational institution: a. May exclude from gross income the value of qualified campus lodging provided by the educational institution. b. Must include in gross income all or a portion of the value of housing provided when the employee pays inadequate rent. Solutions and Suggested Responses to Review Questions appear on next page.

5 Section II Solutions and Suggested Responses to Review Questions: Review Question 1. (Please see page 49 of July JoA.) a. Incorrect. This is part of but not the entire answer. b. Incorrect. This is part of but not the entire answer. c. Correct. The meals must meet both tests to meet the Sec. 119(a) exclusion requirements. d. Incorrect. To qualify for the exclusion, the meals must pass both tests. Review Question 2. (Please see page 50 of July JoA.) a. Incorrect. Because the meals pass both tests, the employee may exclude 100% of their value. b. Incorrect. Because the meals pass both tests, the employee may exclude 100% of their value. c. Incorrect. Because the meals pass both tests, the employee may exclude 100% of their value. d. Correct. Because the meals pass both tests, the employee may exclude 100% of their value. Review Question 3. (Please see page 51 of July JoA.) a. Incorrect. Because the meals were provided for the convenience of the employee and not the employer and the employee was not required to eat at the bank's dining room, the employee must include the entire discount in gross taxable income. b. Incorrect. Because the meals were provided for the convenience of the employee and not the employer and the employee was not required to eat at the bank's dining room, the employee must include the entire discount in gross taxable income. c. Incorrect. Because the meals were provided for the convenience of the employee and not the employer and the employee was not required to eat at the bank's dining room, the employee must include the entire discount in gross taxable income. d. Correct. Because the meals were provided for the convenience of the employee and not the employer and the employee was not required to eat at the bank's dining room, the employee must include the entire discount in gross taxable income. Review Question 4. (Please see page 51 of July JoA.) a. Correct. Section 119 applies to meals provided by an employer in kind. b. Incorrect. Section 119 does not apply to cash meal allowances. c. Section 119 applies to meals provided by an employer in kind but not to cash meal allowances. d. Section 119 does not apply to cash meal allowances but does apply to meals provided by an employer in kind. Review Question 5. (Please see page 54 of July JoA.) a. Incorrect. Sec. 119(d) provides that employees of educational institutions may exclude the value of qualified campus lodging from gross income, but this is not the most complete answer. b. Incorrect. Sec. 119(d) requires educational institution employees to include in gross income all or a portion of the value of housing provided when an employee pays inadequate rent but this is not the most complete answer. c. Correct. Both a and b are correct. d. Incorrect. Both a and b are correct. =========================================End of Section II. REFERRAL INCENTIVE PROGRAM - WE LL PAY YOU FOR REFERRING NEW QUALIFYING CUSTOMERS: Receive $10 for each new customer you refer to us. For every new qualifying customer who pays for an exam and mentions your name, we ll send you a check for $10. It s as simple as that. We welcome any questions by either phone or .

6 Section III. Financing for College with the Uniform Transfer to Minors Act (Page 56 of July JoA) Section III Assignment: 1. Study the article (reference text) in the Journal of Accountancy, paying particular attention to our course objectives stated below. 2. Answer our Review Questions that have been designed to provide an interactive learning experience. 3. Study the Solutions and Suggested Responses to the Review Questions. 4. Answer Final Exam questions 11 through 15. Section III Course Objectives: Section III Course Objectives: 1. To describe a strategy for accumulating tax-free income for a child's future use with the Uniform Transfers to Minors Act (UTMA) or Uniform Gifts to Minors Act (UGMA). 2. To describe the kiddie tax. 3. To describe Sec. 529 plans and compare their use with UTMA accounts. Section III Review Questions: 1. Which of the following may qualify for the preferential income tax rate for taxpayers whose tax rate for 15% or less? a. Dividends from C corporations. b. Net long-term capital gains. c. Interest. d. A, b and c. e. A and b but not c. 2. Which of the following may qualify for preferential tax rates? a. Distributions from partnerships. b. Distributions from S corporations. 3. Which of the following may qualify for preferential tax rates? a. Net long-term capital gains. b. Net short-term capital gains. 4. In 2015, the kiddie tax applies when a minor is less than 18 years old and has net unearned income of times $1,050. a. 50% b. 100% c. 150% d. 200% e. 250% 5. With respect to Sec. 529 plans, which of the following are qualified higher education expenses for students enrolled at least half-time? a. Tuition and fees. b. Books. c. Room and board payments. d. A, b and c. e. A and b but not c. Solutions and Suggested Responses to Review Questions appear on next page.

7 Section III Solutions and Suggested Responses to Review Questions: Review Question 1. (Please see page 57 of July JoA.) a. Incorrect. This is part of but not the entire answer. b. Incorrect. This is part of but not the entire answer. c. Incorrect. Interest does not qualify for preferential rates. d. Incorrect. Two of the three qualify but the other does not. e. Correct. Dividends from C corporations and net long-term capital gains qualify but interest does not. Review Question 2. (Please see page 57 of July JoA.) a. Incorrect. Untaxed distributions from partnerships do not qualify for preferential tax treatment. b. Incorrect. Untaxed distributions from S corporations do not qualify for preferential tax treatment. c. Incorrect. Untaxed distributions from partnerships and S corporations do not qualify for preferential tax treatment. d. Correct. Neither untaxed distribution would qualify for preferential tax treatment. Review Question 3. (Please see page 58 of July JoA.) a. Correct. Net capital gains qualify for the preferential tax rate. b. Incorrect. Net short-term capital gains do not qualify for the preferential tax rate. c. Incorrect. Net long-term capital gains do qualify; net short-term capital gains do not. d. Incorrect. Net long-term capital gains do qualify; net short-term capital gains do not. Review Question 4. (Please see page 58 of July JoA.) a. Incorrect. The percentage is greater than 50%. b. Incorrect. The percentage is greater than 100%. c. Incorrect. The percentage is greater than 150%. d. Correct. The correct percentage is 200% of $1,050. e. Incorrect. The percentage is less than 250. Review Question 5. (Please see page 59 of July JoA.) a. Incorrect. This is part of, but not all of, the correct answer. b. Incorrect. This is part of, but not all of, the correct answer. c. Incorrect. This is part of, but not all of, the correct answer. d. Correct. All of these are qualified higher education expenses for students. e. Incorrect. Room and board are qualifying higher education expenses for students who are least halftime. =========================================End of Section III. REFERRAL INCENTIVE PROGRAM - WE LL PAY YOU FOR REFERRING NEW QUALIFYING CUSTOMERS: Receive $10 for each new customer you refer to us. For every new qualifying customer who pays for an exam and mentions your name, we ll send you a check for $10. It s as simple as that. We welcome any questions by either phone or .

8 Section IV. Transfer Taxes: 5 Questions To Ask Clients with International Ties (Page 62 of July Journal of Accountancy.) Section IV Assignment: 1. Study the article (reference text) in the Journal of Accountancy, paying particular attention to our course objectives stated below. 2. Answer our Review Questions that have been designed to provide an interactive learning experience. 3. Study the Solutions and Suggested Responses to the Review Questions. 4. Answer Final Exam questions 15 through 20. Section IV Course Objectives: 1. To describe issues that will help CPAs in identifying the transfer tax planning opportunities that their international clients may have now or in the future. 2. To describe differences in estate and gift taxes between residents and nonresidents. Section IV Review Questions: 1. Is the test applied to determine if an individual is a U.S. resident for transfer tax purposes the same as the test to determine if an individual is a U.S. Resident for income tax purposes? a. Yes. b. No. 2. An individual is a U.S. Resident for income tax purposes if she or he meets: a. The green card test. b. The substantial presence test. c. The first-year election test. d. All of the above are required. e. Any of the above. 3. The estate tax exemption for nonresidents is currently at: a. $5,430,000. b. $2,715,000. c. $120,000. d. $60, When nonresident parents transfer property outside the U.S. To a child who is a resident of the U.S.: a. That transfer is subject to the U.S. Transfer tax. b. The asset will be subject to a transfer tax upon the death of the child. 5. Persons planning to immigrate to the United States should consider making large gifts to family members in trust they establish domicile in the United States. a. Before b. After Section IV Solutions and Suggested Responses to Review Questions appear on the next page.

9 Section IV Solutions and Suggested Responses to Review Questions: Review Question 1. (Please see page 62 of July JoA.) a. Incorrect. The tests are not the same. This concept is often misunderstood. b. Correct. As a result, an individual could simultaneously be domiciled in the U.S. And subject to U.S. Transfer taxes while also being a U.S. Nonresident who is not subject to US. Income taxes. Review Question 2. (Please see page 63 of July JoA.) a. Incorrect. This taxpayer would qualify but this is not the best and most complete answer. b. Incorrect. This taxpayer would qualify but this is not the best and most complete answer. c. Incorrect. This taxpayer would qualify but this is not the best and most complete answer. d. Incorrect. The taxpayer does not have to meet all of the tests. e. Correct. The taxpayer would qualify by meeting any one of the tests. Review Question 3. (Please see page 64 of July JoA.) a. Incorrect. The estate tax exemption for nonresidents is much less than for residents. b. Incorrect. The estate tax exemption for nonresidents is much less than for residents. c. Incorrect. The estate tax exemption for nonresidents is much less than for residents. d. Correct. The estate tax exemption for nonresidents is currently at $60,000. Review Question 4. (Please see page 65 of July JoA.) a. Incorrect. This transfer would not be subject to the U.S. transfer tax. b. Correct. While the initial transfer would not be subject to the U.S. transfer tax, the assets will be subject to tax upon the death of the child. c. Incorrect. One of the above options is true but the other is not true. d. Incorrect. One of the above options is true but the other is not true. Review Question 5. (Please see page 66 of July JoA.) a. Correct. Just as with most tax planning, these discussions should take place before persons immigrate to the U.S. b. Incorrect. Most options would not be available after the immigrant arrives in the U.S End of Section V. REFERRAL INCENTIVE PROGRAM - WE LL PAY YOU FOR REFERRING NEW QUALIFYING CUSTOMERS: Receive $10 for each new customer you refer to us. For every new qualifying customer who pays for an exam and mentions your name, we ll send you a check for $10. It s as simple as that. We welcome any questions by either phone or .

10 Section V. Section V. Two Fraud Articles: What's Your Fraud IQ? (Page 24 of August JoA) Forensic Interviews: Plan to Succeed (Page 34 of August JoA) Section V Assignment: 1. Study the article (reference text) in the Journal of Accountancy, paying particular attention to our course objectives stated below. 2. Answer our Review Questions that have been designed to provide an interactive learning experience. 3. Study the Solutions and Suggested Responses to the Review Questions. 4. Answer Final Exam questions 21 through 26. Section V Course Objectives: 1. To describe certain consumer scams and the warning signs that typically accompany them. 2. To describe steps that scam victims can take. 3. To describe how forensic interviews can be used effectively to make forensic engagements more efficient. Section V Review Questions: 1. All multilevel-marketing plans illegal pyramid operations. a. Are b. Are not 2. Individuals on the National Do Not Call registry prohibited from making telemarketing calls. a. Are b. Are not 3. It illegal for a person who receives unordered merchandise to open the package without first paying the accompanying invoice. a. Is b. Is not 4. The most common victims of sweetheart schemes are: a. Males over 40. b. Females over 40. c. Males 40 or under. d. Females 40 or under. 5. Fake job listings are often employed to: a. Swindle applicants by requiring upfront application fees. b. Collect personal information that can b e used in an identity-theft schemes. 6. In forensic engagements, interviewers should pay attention to clues. a. Verbal b. Nonverbal c. Both a and b d. Neither a nor b Section V Solutions and Suggested Responses to Review Questions appear on next page.

11 Section V Solutions and Suggested Responses to Review Questions: Review Question 1. (Please see page 25 of August JoA.) a. Incorrect. Not all multilevel-marketing plans are illegal pyramid operations. b. Correct. The distinction between legal vs. illegal multilevel-marketing plans is whether the thrust of marketing is on the sale or goods and/or services vs. compensating representatives merely for signing up more reps. Review Question 2. (Please see page 25 of August JoA.) a. Incorrect. The purpose of the National Do Not Call registry is to prevent telemarketers, not consumers, from making telemarketing calls unless they meet certain standards. b. Correct. The National Do Not Call registry program protects consumers from such calls; it does not place limits on phone calls that registrants can make. Review Question 3. (Please see page 26 of August JoA.) a. Incorrect. It would not be illegal for individuals who receive unordered merchandise not to pay for such goods. They have no responsibility to pay at all. b. Correct. Individuals who receive unordered merchandise do not have to pay for the goods. Review Question 4. (Please see page 30 of August JoA.) a. Incorrect. The most vulnerable group is over 40 but not male. b. Correct. Females over 40 are statistically the most vulnerable group to sweetheart schemes. c. Incorrect. This is not the most vulnerable group. d. Incorrect. This is not the most vulnerable group. Review Question 5. (Please see page 28 of August JoA.) a. Incorrect. This is part of but not the most complete answer. b. Incorrect. This is part of but not the most complete answer. c. Correct. These are two of the most common schemes associated with fake job listings. d. Incorrect. Fake job listings are often used to swindle applicants by requiring them to pay upfront fees and also to collect personal information such as Social Security numbers, birth dates, addresses, etc. for use in identity theft. Review Question 6. (Please see page 37 of August JoA.) a. Incorrect. This is part of but not the most complete answer. b. Incorrect. This is part of but not the most complete answer. c. Correct. Interviewers should look for verbal (what the interviewee says or doesn't say) as well as nonverbal communications such as facial expression, failure to make eye contact, certain body movements, etc. d. Incorrect. Ideally, there should be at least one interviewer and another individual who takes notes on the questions and responses, both verbal and nonverbal. ===================================== End of Section V. REFERRAL INCENTIVE PROGRAM - WE LL PAY YOU FOR REFERRING NEW QUALIFYING CUSTOMERS: Receive $10 for each new customer you refer to us. For every new qualifying customer who pays for an exam and mentions your name, we ll send you a check for $10. It s as simple as that. We welcome any questions by either phone or .

12 Section VI. Two Tax Articles: Moved South But Still Taxed Up North (Page 58 of August 2015 JoA) ) Tax Treatment of Drug Development Company Startup Costs (Page 62 of August 2015 JoA) Section VI Assignment: 1. Study the article (reference text) in the Journal of Accountancy, paying particular attention to our course objectives stated below. 2. Answer our Review Questions that have been designed to provide an interactive learning experience. 3. Study the Solutions and Suggested Responses to the Review Questions. 4. Answer Final Exam questions 26 through 30. Section VI Course Objectives: 1. To describe the differences between a taxpayer's domicile and residence. 2. To describe why taxpayers need to know the estate and inheritance laws in the states they leave. 3. To describe the tax election that a startup company can make to deduct and amortize startup costs rather than to capitalize them. Section VI Review Questions: 1. Can an individual be considered to be a resident of more than one state although domiciled in only one state? a. Yes. b. No. 2. is defined as a person's fixed or permanent abode that the person intends to remain in indefinitely and to which the person intends to return. a. Domicile b. Residency 3. Does moving to Florida or another state mean never having to pay estate tax to another jurisdiction? a. Yes. b. No. 4. Which of the following states have both inheritance as well as estate taxes? a. New Jersey. b. Maryland. c. Connecticut. d. All of the above. e. A and b but not c. 5. Under Sec. 195(c)(1), which of the following is / are included in startup costs? a. Interest. b. Taxes. c. Research and experimental expenditures. d. All of the above. e. None of the above. Section VI Solutions and Suggested Responses to Review Questions appear on the next page.

13 Section VI Solutions and Suggested Responses to Review Questions: Review Question 1: (Please see page 59.) a. Correct. Individuals can be considered to be a resident in more than one state although they will be domiciled in only one state. b. Incorrect. There is a critical difference between domicile and residency Review Question 2. (Please see page 59.) a. Correct. Domicile is defined as a person's fixed or permanent abode that the person intends to remain for indefinitely and to which the person intends to return. b. Incorrect. Residency is a much more flexible term and may be defined differently depending on the state. Review Question 3. (Please see page 61.) a. Incorrect. Despite relocating to Florida, a person's estate may still be liable for estate tax in the state from which the person moved, especially if he or she still owned real estate or a business outside of Florida. b. Correct. Taxpayers who move to Florida should be careful to not only meet the usual list of requirements such as registering to vote in Florida, obtaining a Florida's driver's license, registering to vote, etc., but also careful to get rid of real estate and business interests outside of Florida. Even moving back to ones former state of residence to spend the last years of life in a nursing home near relatives could create an estate tax issue with the former state. Review Question 4. (Please see page 61.) a. Incorrect. This is part of but not the entire answer. b. Incorrect. This is part of but not the entire answer. c. Incorrect. Connecticut does not have both inheritance as well as estate taxes. d. Incorrect. Two of three options have both inheritance and estate taxes but the third one does not. e. Correct. Both New Jersey and Maryland have both inheritance as well as estate tax but Connecticut does not. Review Question 5. (Please see page 64.) a. Incorrect. Interest does not qualify as a startup cost. b. Incorrect. Taxes do not qualify as startup costs. c. Incorrect. Research and experimentation costs do not qualify as startup costs. d. Incorrect. None of these costs qualify as startup costs. e. Correct. Each of these fails to qualify as startup costs. ====================================== End of Section VI REFERRAL INCENTIVE PROGRAM - WE LL PAY YOU FOR REFERRING NEW QUALIFYING CUSTOMERS: Receive $10 for each new customer you refer to us. For every new qualifying customer who pays for an exam and mentions your name, we ll send you a check for $10. It s as simple as that. We welcome any questions by either phone or .

14 Section VII. Tax Columns: From The Tax Adviser (Page 68), Tax Practice Corner (Page 70), Tax Matters (Page 72) Section VII Assignment: 1. Study the article (reference text) in the Journal of Accountancy, paying particular attention to our course objectives stated below. 2. Answer our Review Questions that have been designed to provide an interactive learning experience. 3. Study the Solutions and Suggested Responses to the Review Questions. 4. Answer Final Exam questions 31 through 35. Section VII Course Objectives: 1. To describe certain current issues of using provisions of Sec. 179 and the repair regs. 2. To describe what's required to take ordinary losses and expense deductions on real estate converted from personal use. 3. To describe the tax courts' respective decisions in Redisch, Mikel, and Johnston. Section VII Review Questions: 1. As of August 2015, tax advisers are certain about: a. The deduction limits associated with the repair regs. for b. The Section 179 dollar limitations for As of August 2015, the Section 179 election for certain business assets placed into service in 2015 is: a. $0. b. $25,000. c. $75,000. d. $250,000. e. $500, Is merely listing a property with a rental agent sufficient to show intent to rent? a. Yes. b. No. 4. To qualify for an annual gift exclusion, the gift must be a interest of property. a. Present b. Future c. Either a or b d. Neither a nor b 5. According to Sec. 61(a)(12), which of the following must be included in gross income? a. Discharge of a debt. b. A postponement of due date of an outstanding debt. Section VII Solutions and Suggested Responses to Review Questions appear on next page.

15 Section VII Solutions and Suggested Responses to Review Questions. Review Question 1: (Please see page 68.) a. Correct. The repair regulations were finalized as of January 1, 2014, and are now a permanent part of the tax regulations. b. Incorrect. As of August 2015, no legislative action has been taken to increase the Sec. 179 dollar limitations above $25,000. In recent years, Congress has been unable to increase the size of the limit until the last-minute tax extenders. c. Incorrect. While one of the options (i. e., a ) is true, the other is not. d. Incorrect. While one of the options (I. e., b ) is false, the other not. Review Question 2: (Please page 68.) a. Incorrect. The dollar limit of the Sec. 179 expensing option is more than $0. b. Correct. Barring further legislative action, the Sec. 179 expensing limit for 2015 is $25,000. c. Incorrect. Barring further legislative action, the Sec. 179 expensing limit for 2015 is $25,000. d. Incorrect. Barring further legislative action, the Sec. 179 expensing limit for 2015 is $25,000. e. Incorrect. Barring further legislative action, the Sec. 179 expensing limit for 2015 is $25,000. Review Question 3: (Please see page 70.) a. Incorrect. To prove an intent to rent, taxpayers must demonstrate a proactive effort to rent their property. b. Correct. Merely passively listing a property and not actively following up with inquiries or aggressively taking steps to close deals with prospective renters is not enough to prove an intent to rent. Review Question 4: (Please see page 74.) a. Correct. To qualify for an annual gift exclusion, taxpayers must establish that the gift is in fact a present interest of property. b. Incorrect. The gift of a future interest of property does not qualify for the annual gift tax exclusion. c. Incorrect. Only gifts of present interests in property qualify for the gift tax exclusion. d. Incorrect. Only gifts of present interests in property qualify for the gift tax exclusion. Review Question 5: (Please see page 78.) a. Correct. According to Sec. 61(a)(12), the discharge of a debt must be included in gross income. b. Incorrect. The mere postponement of the due date of an outstanding debt does not discharge the debt and therefore is not required to be included in gross income. c. Incorrect. A discharge of debt is taxable while the mere postponement of the due date is not. d. Incorrect. The mere postponement of the due date of a debt is not taxable but the discharge of a debt must be included in gross income. ====================================== End of Section VII. REFERRAL INCENTIVE PROGRAM - WE LL PAY YOU FOR REFERRING NEW QUALIFYING CUSTOMERS: Receive $10 for each new customer you refer to us. For every new qualifying customer who pays for an exam and mentions your name, we ll send you a check for $10. It s as simple as that. We welcome any questions by either phone or .

16 Section VIII Tax Software Survey (Page 24 of September JoA) Section VIII Assignment: 1. Study the article (reference text) in the Journal of Accountancy, paying particular attention to our course objectives stated below. 2. Answer our Review Questions that have been designed to provide an interactive learning experience. 3. Study the Solutions and Suggested Responses to the Review Questions. 4. Answer Final Exam questions 36 through 40. Section VIII Course Objectives: 1. To describe the perceived strengths and weaknesses of major tax preparation software products used during the 2015 tax season. 2. To describe the internal dynamics of why tax preparers in the survey switched from one tax preparation software product to another. Section VIII Review Questions: 1. Which tax software package was rated lowest for handling multistate business returns? a. UltraTax CS. b. Drake. c. Lacerte. d. ProSeries. e. GoSystem Tax RS. 2. Which tax software package was rated lowest for handling transfers of data within returns? a. UltraTax CS. b. Drake. c. Lacerte. d. ProSeries. e. GoSystem Tax RS. 3. In the survey, users were least likely to recommend their tax software product. a. Drake b. ATX c. UltraTax CS. d. ProSeries. e. CCH Axcess Tax. 4. The 2015 survey showed that the majority of technical support from tax software vendors was via: a. Phone. b. . c. Live chat / IM. d. Other. 5. Users of were least likely to need technical support from their tax software provider. a. GoSystem Tax RS. b. CCH Axcess Tax. c. Drake. d. UltraTax CS. e. ProSeries. Section VIII Solutions and Suggested Responses to Review Questions appear on the next page.

17 Section VIII Solutions and Suggested Responses to Review Questions. Review Question 1: (Please see page 26.) a. Incorrect. UltraTax CS was actually rated highest for handling multistate business returns. b. Incorrect. Drake was rated next to highest for handling multistate business returns. c. Incorrect. Lacerte was not rated lowest for handling multistate business returns. d. Incorrect. ProSeries was not rated lowest for handling multistate business returns. e. Correct. GoSystem Tax RS was rated lowest for handling multistate business returns. Review Question 2: (Please see page 26.) a. Incorrect. UltraTax CS was actually rated highest for handling transfers of data within returns. b. Incorrect. Drake tied with ProSeries for next to highest for handling transfers of data within returns. c. Incorrect. Lacerte was not rated lowest for handling transfers of data within returns. d. Incorrect. ProSeries tied with Drake for next to highest for handling transfers of data within returns. e. Correct. GoSystem Tax RS was rated lowest for handling transfers of data within returns. Review Question 3: (Please see page 26.) a. Incorrect. Drake was actually most likely to be recommended by current users. b. Incorrect. ATX received a respectable score and not the highest nor the lowest. c. Incorrect. UltraTax CS received a respectable score and not the highest nor the lowest. d. Incorrect. ProSeries received a respectable score and not the highest nor the lowest. e. Correct. CCH Axcess Tax was least likely to be recommended by current users. Review Question 4: (Please see page 29.) a. Correct. 92.2% of respondents received some of their support via phone. b. Incorrect. 28.9% of respondents received some of their support via . c. Incorrect. 21.2% of respondents received some of their support via chat/im. d. Incorrect. Only 2.0% of respondents received their support via other means. Review Question 5: (Please see page 29.) a. Incorrect. GoSystem Tax RS users were actually most likely to need technical support. b. Incorrect Axcess Tax users were actually the second most likely to need technical support. c. Incorrect. Drake was in the middle of the pack as far as the need for technical support. d. Incorrect. UltraTax CS was in the middle of the pack as far as the need for technical support. e. Correct. ProSeries users were actually least likely to need technical support. ====================================== End of Section VIII. REFERRAL INCENTIVE PROGRAM - WE LL PAY YOU FOR REFERRING NEW QUALIFYING CUSTOMERS: Receive $10 for each new customer you refer to us. For every new qualifying customer who pays for an exam and mentions your name, we ll send you a check for $10. It s as simple as that. We welcome any questions by either phone or .

18 Section IX. Three Auditing Articles: How To Rate External Auditors (Page 20) Succeeding with a Narrow Focus (Page 56) How to Perform High-Quality EBP Audits (Page 60) Section IX Assignment: 1. Study the article (reference text) in the Journal of Accountancy, paying particular attention to our course objectives stated below. 2. Answer our Review Questions that have been designed to provide an interactive learning experience. 3. Study the Solutions and Suggested Responses to the Review Questions. 4. Answer Final Exam questions 41 through 45. Section IX Course Objectives: 1. To describe a checklist for assessing external auditors especially from the perspective of an audit committee charged with oversight of external auditors. 2. To describe certain suggestions for focusing on specific kinds of audits. 3. To describe the requirements for performing employee benefit plan audits. Section IX Review Questions: 1. The audit committee of a public company: a. Is under increasing regulatory pressure to ensure that external auditors are doing good work. b. Should check on the experience of the auditor. c. Should check to see if sufficient resources were made available to the external auditors. d. A, b and c. e. A and b but not c. 2. Which of the following is / are considered to be high risk audit areas? a. Audits of employee benefit plans. b. Audits of broker-dealers. c. Examinations of service organization controls (SOC engagements). d. A, b and c. e. A and b but not c. 3. A recent study by the U.S. Department of Labor found deficiencies in of 400 EBP audits by 232 firms for the 2011 filing plan year. a. 9% b. 19% c. 29% d. 39% 4. Auditors performing limited-scope engagements must determine that disclosures in the financial statements and footnotes related to the certified investment information are: a. In accordance with GAAP. b. In compliance with DOL rules and regulations. 5. Which of the following supports the continuation of the limited-scope audit exemption? a. The U.S. Department of Labor. b. The AICPA. Section IX Solutions and Suggested Responses to Review Questions appear on the next page.

19 Section IX Solutions and Suggested Responses to Review Questions: Review Question 1: (Please see page 20.) a. Incorrect. This is part of but not the most complete answer. b. Incorrect. This is part of but not the most complete answer. c. Incorrect. This is part of but not the most complete answer. d. Correct. This is the only complete answer provided. e. Incorrect. A, b and c are all part of the complete answer. Review Question 2: (Please see pages ) a. Incorrect. This is part of but not the most complete answer. b. Incorrect. This is part of but not the most complete answer. c. Incorrect. This is part of but not the most complete answer. d. Correct. This is the only complete answer provided. e. Incorrect. A, b and c are all part of the complete answer. Review Question 3: (Please see page 58.) a. Incorrect. The percentage of deficiencies in the sample of 400 EBT audits of 2011 was considerably higher than 9%. b. Incorrect. The percentage of deficiencies in the sample of 400 EBT audits of 2011 was considerably higher than 19%. c. Incorrect. The percentage of deficiencies in the sample of 400 EBT audits of 2011 was considerably higher than 29%. d. Correct. The percentage of deficiencies in the sample of 400 EBT audits of 2011 was 39%. Review Question 4: (Please see page 63.) a. Incorrect. This is part of but not the most complete answer. b. Incorrect. This is part of but not the most complete answer. c. Correct. Auditors performing limited-scope engagements must take both into consideration. d. Incorrect. Auditors performing limited-scope engagements must take both into consideration. Review Question 5: (Please see pages ) a. Incorrect. The U.S. Department of Labor does not support the continuation of the limited-scope audit exemption. b. Incorrect. The AICPA does not support the continuation of the limited-scope audit exemption. c. Incorrect. Neither the U.S. Department of Labor nor the AICPA supports the continuation of the limited-scope audit exemption. d. Correct. Both the AICPA and the DOL oppose the continuation of the limited-scope audit exemption. End of section IX

20 Section X. Three Tax Columns: From The Tax Adviser (Page 76 of the September JoA) Tax Practice Corner (Page 78 of the September JoA) Tax Matters (Page 82 of the September JoA) Section X Assignment: 1. Study the articles (reference text) in the Journal of Accountancy, paying particular attention to our course objectives stated below. 2. Answer our Review Questions that have been designed to provide an interactive learning experience. 3. Study the Solutions and Suggested Responses to the Review Questions. 4. Answer Final Exam questions 46 through 50. Section X Course Objectives: 1. To describe the opportunities as well as the requirements for deducting amounts paid for tickets to sports events. 2. To describe how the Patient Protection and Affordable Care Act affects most health reimbursement arrangements. 3. To briefly describe the final IRS portability rules for estate tax exemption. To describe the final portability rules for estate tax exemptions. We recommend a short Youtube video: Section X Review Questions: 1. A business pays $100 for an NFL game ticket and mails it to a customer who attends the game alone. This is the only gift that the business makes during the year. The business is entitled to a: a. Business entertainment deduction of $100. b. Business entertainment deduction of $25. c. Gift deduction of $100. d. Gift deduction of $ The expiration date for Notice 's time relief for employer payment plans (other than for S corporation 2% shareholder-employees) is: a. December 31, b. June 30, c. December 31, d. June 30, e. December 31, Section 9831 provides an exception for a group plan with up to employee(s). a. One b. Two c. Five d. 10 e The final portability rules for estate tax exemptions apply to decedents dying on or after: a. January 1, b. June 12, c. June 12, d. June 12, e. June 12, In Ibrahim, did the Eighth Circuit hold that the term separate return as used in Sec. 6013(b) include a head-of-household return? a. Yes. b. No. Section X Solutions and Suggested Responses to Review Questions appear on the next page.

21 Section X Solutions and Suggested Responses to Review Questions: Review Question 1. (Please see page 76.) a. Incorrect. Because no one from the business accompanied the customer to the game, the requirement that business be actively discussed was not met; therefore there can be no entertainment deduction. b. Incorrect. Because no one from the business accompanied the customer to the game, the requirement that business be actively discussed was not met; therefore there can be no entertainment deduction. c. Incorrect. This would be a gift but the ceiling for a gift is $25 per tax year. d. Correct. The NFL ticket is a gift and eligible for a gift deduction of $25. Review Question 2: (Please see page 78.) a. Incorrect. The expiration date is not this early. b. Correct. The expiration date is June 30, c. Incorrect. The expiration date is earlier than this. d. Incorrect. The expiration date is earlier than this. e. Incorrect. The expiration date is earlier than this. Review Question 3. (Please see page 80.) a. Correct. The Section 9831 exemption is for a group involving fewer than two persons. b. Incorrect. The Section 9831 exemption is for a group involving fewer than two persons. c. Incorrect. The Section 9831 exemption is for a group involving fewer than two persons. d. Incorrect. The Section 9831 exemption is for a group involving fewer than two persons. e. Incorrect. The Section 9831 exemption is for a group involving fewer than two persons. Review Question 4. (Please see page 82.) a. Incorrect. The temporary regulations still apply to estates of decedents dying on or after January 1, b. Incorrect. The temporary regulations still apply to estates of decedents dying on or after January 1, c. Incorrect. The temporary regulations still apply to estates of decedents dying on or after January 1, d. Incorrect. The temporary regulations still apply to estates of decedents dying on or after January 1, e. Correct. The final regulations apply to estates of decedents dying on or after June 12, Review Question 5. (Please see page 83.) a. Incorrect. The Eighth Circuit disagreed with the Tax Court opinion. b. Correct. The Eighth Circuit held that the term separate return as used in Sec. 6013(b) does not include a head-of-household return. ========================================= End of Section X. REFERRAL INCENTIVE PROGRAM - WE LL PAY YOU FOR REFERRING NEW QUALIFYING CUSTOMERS: Receive $10 for each new customer you refer to us. For every new qualifying customer who pays for an exam and mentions your name, we ll send you a check for $10. It s as simple as that. We welcome any questions by either phone or .