REG ME 2 – WMC QUESTIONS AND VERIFIED
ANSWERS
Sand orally promised Frost a 10,000 bonus, in addition to a monthly salary, if Frost
would work two years for Sand. If Frost works for the two years, will the Statue of
Frauds be a defense if Sand refuses to pay Frost the bonus? - Answers - No, because
Frost fully performed
There is an exception if one party has fully performed his/her part of the contract. In
such a case, the contract can be enforced despite the lack of a sufficient writing if the
aggrieved party can convince the court that the oral term was indeed part of the
contract.
Albert and Carol Dutton were divorced in January of the current year. In accordance
with the divorce decree, Albert transferred title in their home to Carol during the year.
The home, which had a fair market value of 450,000, was subject to a mortgage of
300,000 that had more than 25 years remaining in the amortization schedule. Monthly
mortgage payments amount to 2,200. Under the terms of the settlement, Albert is
obligated to make the mortgage payments on the home for the full remaining 25-year
term of the indebtedness, regardless of how long Carol lives. Albert made 12 mortgage
payments during the current year. What amount is taxable as alimony on Carols' current
year tax return? - Answers - 0
Payments that are required to be paid, even if the recipient dies, are not considered to
be payments for support (alimony), and are considered to be amounts owed to the
payee as part of the divorce settlement (i.e., property settlements).
Marcus incurred 750 of expenses for business meals and entertainment in his position
as an employee of Alexander Corporation. Marcus' expenses were not reimbursed. This
expenditure is: - Answers - A deduction from adjusted gross income, subject to a 2%
AGI floor
Employee's business expenses are deductible as a miscellaneous itemized deduction
(from AGI) subject to a 2% AGI floor. Meals and entertainment expenses are also
limited to a 50% deduction before being subject to the 2% floor.
What are some necessary things in order to have a security interest attach? - Answers -
-Value must be given by the creditor
-Either the creditor must take possession of the collateral or the debtor must sign a
security agreement that describes the collateral
-The debtor must have rights in the collateral
Must there be a proper filing to have a security interest attach? - Answers - No
, Does the penalty for failure to file information returns apply for a failure that is due to
reasonable cause and not due to willful neglect? (with respect to tax preparers) -
Answers - No, there is no penalty when due to reasonable cause and not due to willful
neglect
Riley purchased Series EE US Savings Bonds in 1998. Redemption proceeds will be
used for payment of the college tuition for Riley's dependent child. One of the conditions
that must be met for the tax exemption of accumulated interest on these bonds is that
the: - Answers - Purchaser of the bonds must be the sole owner of the bonds (or joint
owner with his or her spouse)
Which of the following is a security exempt from the registration requirements of the
Securities Act of 1933?
-A class of stock issued in exchange for another class by the issuer to its existing
shareholders without payment of a commission
-convertible, subordinated debentures issued by a manufacturing company
-common stock with a par value of less than $1.00
-Warrants to purchase preferred stock - Answers - A class of stock issued in exchange
for another class by the issuer to its existing shareholders without payment of a
commission
The 1933 Act provides an exemption from registration when an issuer exchanges
securities with its existing holders and no commission is paid.
Which of the following are not allowable deductions from the gross estate to arrive at
the taxable estate?
-medical expenses of the decedent paid 13 months after death
-gift taxes paid on gifts made after 1976
-unlimited transfers to the decedent's spouse
-funeral costs - Answers - gift taxes paid on gifts made after 1976
Gift taxes paid (on gifts made after 1976) are a credit against the gross estate tax, not a
deduction to arrive at the taxable estate
On June 1, Year 3, Baxter Corp adopted a plan of complete liquidation. On December
1, Year 3, Baxter distributed to its stockholders installment notes receiveable that Baxter
had acquired in connection with the sale of land in Year 2. The following information
pertains to these notes:
Baxter's basis = 85,000
FMV = 150,000
Face amount = 180,000
ANSWERS
Sand orally promised Frost a 10,000 bonus, in addition to a monthly salary, if Frost
would work two years for Sand. If Frost works for the two years, will the Statue of
Frauds be a defense if Sand refuses to pay Frost the bonus? - Answers - No, because
Frost fully performed
There is an exception if one party has fully performed his/her part of the contract. In
such a case, the contract can be enforced despite the lack of a sufficient writing if the
aggrieved party can convince the court that the oral term was indeed part of the
contract.
Albert and Carol Dutton were divorced in January of the current year. In accordance
with the divorce decree, Albert transferred title in their home to Carol during the year.
The home, which had a fair market value of 450,000, was subject to a mortgage of
300,000 that had more than 25 years remaining in the amortization schedule. Monthly
mortgage payments amount to 2,200. Under the terms of the settlement, Albert is
obligated to make the mortgage payments on the home for the full remaining 25-year
term of the indebtedness, regardless of how long Carol lives. Albert made 12 mortgage
payments during the current year. What amount is taxable as alimony on Carols' current
year tax return? - Answers - 0
Payments that are required to be paid, even if the recipient dies, are not considered to
be payments for support (alimony), and are considered to be amounts owed to the
payee as part of the divorce settlement (i.e., property settlements).
Marcus incurred 750 of expenses for business meals and entertainment in his position
as an employee of Alexander Corporation. Marcus' expenses were not reimbursed. This
expenditure is: - Answers - A deduction from adjusted gross income, subject to a 2%
AGI floor
Employee's business expenses are deductible as a miscellaneous itemized deduction
(from AGI) subject to a 2% AGI floor. Meals and entertainment expenses are also
limited to a 50% deduction before being subject to the 2% floor.
What are some necessary things in order to have a security interest attach? - Answers -
-Value must be given by the creditor
-Either the creditor must take possession of the collateral or the debtor must sign a
security agreement that describes the collateral
-The debtor must have rights in the collateral
Must there be a proper filing to have a security interest attach? - Answers - No
, Does the penalty for failure to file information returns apply for a failure that is due to
reasonable cause and not due to willful neglect? (with respect to tax preparers) -
Answers - No, there is no penalty when due to reasonable cause and not due to willful
neglect
Riley purchased Series EE US Savings Bonds in 1998. Redemption proceeds will be
used for payment of the college tuition for Riley's dependent child. One of the conditions
that must be met for the tax exemption of accumulated interest on these bonds is that
the: - Answers - Purchaser of the bonds must be the sole owner of the bonds (or joint
owner with his or her spouse)
Which of the following is a security exempt from the registration requirements of the
Securities Act of 1933?
-A class of stock issued in exchange for another class by the issuer to its existing
shareholders without payment of a commission
-convertible, subordinated debentures issued by a manufacturing company
-common stock with a par value of less than $1.00
-Warrants to purchase preferred stock - Answers - A class of stock issued in exchange
for another class by the issuer to its existing shareholders without payment of a
commission
The 1933 Act provides an exemption from registration when an issuer exchanges
securities with its existing holders and no commission is paid.
Which of the following are not allowable deductions from the gross estate to arrive at
the taxable estate?
-medical expenses of the decedent paid 13 months after death
-gift taxes paid on gifts made after 1976
-unlimited transfers to the decedent's spouse
-funeral costs - Answers - gift taxes paid on gifts made after 1976
Gift taxes paid (on gifts made after 1976) are a credit against the gross estate tax, not a
deduction to arrive at the taxable estate
On June 1, Year 3, Baxter Corp adopted a plan of complete liquidation. On December
1, Year 3, Baxter distributed to its stockholders installment notes receiveable that Baxter
had acquired in connection with the sale of land in Year 2. The following information
pertains to these notes:
Baxter's basis = 85,000
FMV = 150,000
Face amount = 180,000
