Removed Ninja Questions

Pick, CPA, was engaged by Edge Corp. to audit Edge's financial statements. Pick, in performing the audit and rendering an unqualified opinion, intentionally ignored several material omissions in the financial statements. Edge included Pick's audit report in its annual filing with the SEC and in its annual stockholders' report. Drane purchased shares of Edge stock based on Drane's review of the past performance of the stock and current-year financial statements. When the omissions in the financial statements became known, the value of Edge stock declined and Drane suffered a loss. Under the provisions of Rule 10b-5 of the Securities Exchange Act of 1934, what will be the result of a suit by Drane against Pick? A. Drane will win because Pick acted with intent. B. Drane will win because Pick was negligent. C. Drane will lose because only Edge is liable. D. Drane will lose because the stock purchased was not part of a new issue.

A According to Section (b), Rule 10b-5 of The Securities Exchange Act of 1934, it is unlawful to make any untrue statement of material fact or omit to state a material fact. Violation of the same would result in civil damages and/or criminal damages.

Generally, an estate is liable for which debts owed by the decedent at the time of death? A. All of the decedent's debts B. Only debts secured by the decedent's property C. Only debts covered by the Statute of Frauds D. None of the decedent's debts

A An estate is a legal entity which comes into existence upon the death of an individual and succeeds to the title of all property owned by the individual. It also assumes liability for all debts owed by the decedent at the time of her/his death.

If securities are exempt from the registration provisions of the Securities Act of 1933, any fraud committed in the course of selling such securities can be challenged by SEC Person defrauded A. Yes Yes B. Yes No C. No Yes D. No No

A Anti-Fraud provisions are contained in Section 11 (misstatements in registration statements), Section 12 (civil anti-fraud section) and Section 17 (criminal anti-fraud section) of the Securities Act of 1933. These anti-fraud provisions apply even if the transactions and/or securities are exempt from registration. The SEC may act to suspend or revoke the right to sell or trade the securities in case of fraud. The specific persons victimized may also file lawsuits against the issuer.

Corporations that are exempt from registration under the Securities Exchange Act of 1934 are subject to the Act's A. Antifraud provisions B. Proxy solicitation provisions C. Provisions dealing with the filing of annual reports D. Provisions imposing periodic audits

A Anti-fraud provisions of the 1934 Act apply to all corporations irrespective of whether they are exempt or not. The anti-fraud provisions of the 1934 Act are as follows: (1) Section 10, Rule 10b-5: It is unlawful to make any untrue statement of a material fact or to omit to state a material fact. (2) Section 18: A person can be held liable for intentionally making false and/or misleading statements in a registration statement or any report required under the 1934 Act Option (B), (C) and (D) are incorrect because these provisions apply only to those companies that are required to be registered under the Securities Exchange Act of 1934.

Which of the following transactions is subject to registration requirements of the Securities Act of 1933? A. The public sale by a corporation of its negotiable 10-year notes B. The public sale by a charitable organization of 10-year bearer bonds C. The sale across state lines of municipal bonds issued by a city D. Issuance of stock by a publicly-traded corporation to its shareholders because of a stock split

A As per The Securities Act of 1933, all securities must be registered unless they are exempt (exempt transactions or exempt securities, Securities include common stock, preferred stock, treasury stock, bonds, debentures, options, warrants, and notes. As such, public sale by a corporation of its negotiable 10-year notes is subject to registration.

World Corp. wanted to make a public offering of its common stock. On May 10, World prepared and filed a registration statement with the SEC. On May 20, World placed a "tombstone ad" announcing that it was making a public offering. On May 25, World issued a preliminary prospectus and the registration statement became effective on May 30. On what date may World first make oral offers to sell the shares? A. May 10 B. May 20 C. May 25 D. May 30

A Before registration with the SEC no sale of securities may occur. Once the SEC deems the registration is complete, the registration is "effective" 20 days after filing. During the period after filing but before registration is effective (20 days waiting period), some sales activity like oral offers to sell, placing tombstone advertisements or issuing a "red herring" prospectus is allowed. Therefore, World Corp. may begin to make oral offers to sell from the date of filing (May 10) which can continue until the date when registration is effective (May 30).

West is single, has no dependents, and does not itemize. West provides the following information regarding his current-year's return: Long-term capital gain $15,000 Percentage depletion in excess of property's adjusted basis $9,000 Dividends from publicly-held companies $10,000 What is the amount of West's AMT tax preference items? A. $9,000 B. $19,000 C. $24,000 D. $34,000

A Certain deductions or income that is exempt from taxation for regular tax purposes must always be added back for computing Alternate Minimum Taxable Income (AMTI). These include: • Depreciation on pre-1987 Real or Personal property • Interest on Private Activity Bonds • Percentage Depletion Therefore, Percentage depletion in excess of the property's adjusted basis, i.e., $9,000 is added back as AMT tax preference items. Long-term capital gain and dividends from publicly-held companies are included in income for regular tax purposes and are not deducted for AMT purposes, so are not preferences.

Robert had current-year adjusted gross income of $100,000 and potential itemized deductions as follows: Medical expenses (before percentage limitations) $12,000 New Mexico state income taxes $4,000 Real estate taxes $3,500 Qualified housing and residence mortgage interest $10,000 Home equity mortgage interest (used to consolidate personal debts $5,000 Charitable contributions (cash to Albuquerque food bank) $5,000 What are Robert's itemized deductions for alternative minimum tax? A. $19,500 B. $17,000 C. $15,000 D. $23,000

A Certain itemized deductions that are allowed for regular tax purposes must be added back for AMT purposes, thus increasing the Alternative Minimum Taxable Income. With the introduction of the Tax Cut and Jobs Act (TCJA) in 2017, there are several changes to AMT calculations which either eliminate the itemized deduction or limit them: 1) $4,500 - The limit for regular taxes is 7.5% of AGI from 2020 and the same for AMT and therefore, Medical Expense deduction allowed is ($12,000 -7.5% of $100,000). 2) $0 - State and local income taxes and real estate taxes are never deductible for AMT purposes. TCJA update: There is a $10,000 overall limit for the deduction of state and local income taxes, state and local property taxes, and personal taxes for regular tax purposes. 3) $10,000 - Home mortgage interest on acquisition indebtedness is an itemized deduction for both regular and AMT purposes. 4) $0 -. TCJA update: Interest on a home equity loan is deductible for regular tax purposes only if the loan is considered acquisition debt. Proceeds from a home equity loan are considered acquisition indebtedness if they are used to buy, build, or substantially improve the taxpayer's home. Accordingly, any home equity interest paid on loans used for other purposes is not deductible for regular tax purposes and would not be added back to calculate AMT. 5) $5,000 - Charitable contribution deduction is allowed for both regular and AMT purposes and is within AGI limits.

Which one of the following is a valid deduction from a decedent's gross estate? A. Expenses of administering and settling the estate B. A bequest to the decedent's parent C. Income tax paid on income earned and received after the decedent's death D. Federal estate tax

A Expenses such as commissions of the executor, attorney's or accountant's fees, court costs, and certain selling fees are properly classified as administration expenses and are valid deductions from the decedent's gross estate [§2053]. These deductions will reduce the gross estate which will be used to calculate the taxable estate figure.

Within how many months after the date of a decedent's death is the federal estate tax return (Form 706) due if no extension of time for filing is granted? A. 9 B. 6 C. 4 1/2 D. 3 1/2

A If an estate tax return is required, then it must be filed nine months after the date of the decedent's death. Six months after the date of the decedent's death is the time frame for the "alternate valuation date" of the gross estate.

Income in respect of a cash basis decedent A. Covers income earned before the taxpayer's death but not collected until after death B. Receives a stepped-up basis in the decedent's estate C. Must be included in the decedent's final income tax return D. Cannot receive capital gain treatment

A Income in respect of a cash basis decedent is income that has been earned by the decedent up to the point of death, but is not reported on the final income tax return because it has not been received. It will be included in the estate tax return at its fair market value.

Which of the following statements concerning an initial intrastate securities offering made by an issuer residing in and doing business in that state is correct? A. The offering would be exempt from the registration requirements of the Securities Act of 1933. B. The offering would be subject to the registration requirements of the Securities Exchange Act of 1934. C. The offering would be regulated by the SEC. D. The shares of the offering could not be resold to investors outside the state for at least one year.

A Intrastate securities offerings are transactions exempt from registration. These are securities offered exclusively to residents of a state by entities which carry out at least 80% of their operations in that state. Additionally, investors should agree not to resell the securities to non-residents for at least 9 months.

An offering made under the provisions of Regulation A of the Securities Act of 1933 requires that the issuer A. File an offering circular with the SEC B. Sell only to accredited investors C. Provide investors with the prior four years audited financial statements D. Provide investors with a proxy registration statement

A Offering under Regulation A is exempt from registration under the 1933 Act. One of the requirements under Regulation A is that the issuer files an offering circular with the SEC. The other requirements under Regulation A are: -Issuers can raise up to $50 million within a 12-month time period - Offerings can be freely advertised and there is no restriction on resale or type of investors -SEC must be notified within 15 days of the first sale

Which of the following statements concerning the prospectus required by the Securities Act of 1933 is correct? A. The prospectus is a part of the registration statement. B. The prospectus should enable the SEC to pass on the merits of the securities. C. The prospectus must be filed after an offer to sell. D. The prospectus is prohibited from being distributed to the public until the SEC approves the accuracy of the facts embodied therein.

A Registration statement consists of two parts, (1) prospectus and (2) registration statement (disclosure document). A prospectus summarizes information in part (2) i.e. the registration statement. It contains historical company information and discusses the risk involved.

Data, Inc. intends to make a $750,000 common stock offering under Rule 504 of Regulation D of the Securities Act of 1933. Data A. May sell the stock to an unlimited number of investors B. Must make the offering through a general advertising C. Must offer the stock for a period of more than 12 months D. Must provide all investors with a prospectus

A Regulation D of the Securities Act of 1933 covers Rule 504 and 506. Under Rule 504, offerings upto $5 million may be made to unlimited number of investors.

Coffee Corp., a publicly-held corporation, wants to make an $8,000,000 exempt offering of its shares as a private placement offering under Regulation D, Rule 506, of the Securities Act of 1933. Coffee has more than 500 shareholders and assets in excess of $1 billion, and has its shares listed on a national securities exchange. Which of the following statements is/are correct? I. Coffee Corp. may make the Regulation D, Rule 506, exempt offering. II. Coffee Corp., because it is required to report under the Securities Exchange Act of 1934, may not make an exempt offering. A. I only B. II only C. Both I and II D. Neither I nor II

A Regulation D, Rule 506 permits public as well as non-public corporations to raise an unlimited amount of money without full registration. Transactions exempted from the full registration requirements of the 1933 Securities Act are not exempt from the reporting requirements of the Securities Exchange Act of 1934.

Lux Limited Partnership intends to offer $600,000 of its limited partnership interests under Rule 504 of Regulation D of the Securities Act of 1933. Which of the following statements is correct? A. The resale of the limited partnership interests by a purchaser may be restricted. B. The limited partnership interests may be sold only to accredited investors. C. The exemption under Rule 504 is not available to an issuer of limited partnership interests. D. The limited partnership interests may not be sold to more than 35 investors.

A Rule 504 allows resale within the first two years only within certain restrictions. Rule 504 does not disallow the sale of securities to any class of investors. The Rule 504 exemption is available to the issuers of limited partnership interests. Rule 504 does not place restrictions on the class or number of investors to whom the securities may be sold.

Kamp is offering $10 million of its securities. Under Rule 506 of Regulation D of the Securities Act of 1933, A. The securities may be debentures. B. Kamp must be a corporation. C. There must be more than 35 purchasers. D. Kamp may make a general solicitation in connection with the offering.

A Rule 506 of Regulation D of Securities Act of 1933 covers private placements of unlimited dollar value and time. Securities that are being offered include stock, bonds, debentures, options, warrants, limited partnerships, all investment contracts.

A $10,000,000 offering of corporate stock intended to be made pursuant to the provisions of Rule 506 of Regulation D of the Securities Act of 1933 would not be exempt under Rule 506 if A. The offering was made through a general solicitation or advertising. B. Some of the investors are nonaccredited. C. There are more than 35 accredited investors. D. The SEC was notified 14 days after the first sale of the securities.

A The Securities Act of 1933 allows certain exemptions that may either relate to the security being offered (exempt securities) or the way in which the security is being offered (exempt transactions) Regulation D establishes two important exempt transactions in Rules 504 and 506. Under Rule 506 of Regulation D, there is no limitation of dollar value and time for the offerings. For offerings made under Rule 506, solicitation or advertising can be made only if all purchasers are accredited investors (JOBS Act - Jumpstart Our Business Startups). So, if the offering is made through a general solicitation or advertising to non-accredited investors, it would not be exempt under Rule 506.

Fred and Amy Kehl, both US citizens, are married. All of their real and personal property is owned by them as tenants by the entirety or as joint tenants with right of survivorship. The gross estate of the first spouse to die A. Includes 50% of the value of all property owned by the couple, regardless of which spouse furnished the original consideration B. Includes only the property that had been acquired with the funds of the deceased spouse C. Is governed by the federal statutory provisions relating to jointly held property, rather than by the decedents interest in community property vested by state law, if the Kehls reside in a community property state D. Includes one-third of the value of all real estate owned by the Kehls, as the dower right in the case of the wife or curtesy right in the case of the husband

A The decedent's fractional share of the property is included in the gross estate [Reg. §20.20401(a)(1)]. In this case, two individuals are involved; therefore 50% of the value of property owned is included. The question of who furnished the original consideration is not considered.

Rule 504 of Regulation D of the Securities Act of 1933 provides issuers with an exemption from registration for certain small issues. Which of the following statements is correct? A. The rule allows sales to an unlimited number of investors. B. The rule requires certain financial information to be furnished to the investors. C. The issuer must offer the securities through general public advertising. D. The issuer is not required to file anything with the SEC.

A Under Rule 504 of Regulation D, there is an exemption for $5 million of securities sold within a 12- month period to any number of investors. No specific disclosure is required, unless general solicitation is used or resale is expected within the first two years. The issuer is required to file some information with the SEC.

Under the Securities Exchange Act of 1934, a corporation with common stock listed on a national stock exchange A. Is prohibited from making private placement offerings B. Is subject to having the registration of its securities suspended or revoked C. Must submit Form 10-K to the SEC except in those years in which the corporation has made a public offering D. Must distribute copies of Form 10-K to its stockholders

B A company listed on a national stock exchange is required to be register under the 1934 Act. Its registration may be suspended or revoked if it fails to meet the reporting requirements of the act.

Which of the following disclosures must be contained in a securities registration statement filed under the Securities Act of 1933? A. A list of all existing stockholders B. The principal purposes for which the offering proceeds will be used C. A copy of the corporation's latest proxy solicitation statement D. The names of all prospective accredited investors

B A securities registration statement filed under the Securities Act of 1933 must contain the following information: (1) information about the nature of the issuer's business, (2) description of the securities to be issued, (3) capital structure of the issuer, (4) an estimate of the amount of proceeds and their anticipated use, (5) underwriting arrangements, (6) certified financial statements, and (7) required signatures of the issuer. A list of all existing or potential stockholders is not required. A copy of the latest proxy solicitation statement is not required.

When a common stock offering requires registration under the Securities Act of 1933, A. The registration statement is automatically effective when filed with the SEC. B. The issuer would act unlawfully if it were to sell the common stock without providing the investor with a prospectus. C. The SEC will determine the investment value of the common stock before approving the offering. D. The issuer may make sales 10 days after filing the registration statement.

B According to the Securities Act of 1933, all companies making a public offering of securities (stocks, bonds, debentures, options, warrants, limited partnership interest, investment contracts) involving interstate commerce, must provide its prospective investors with a prospectus. A prospectus could be a written, TV or radio offer to sell securities along with a summary of the information provided within the registration statement. This is not applicable to certain exempt transactions and exempt securities.

A plaintiff wishes to recover damages from the issuer for losses resulting from material misstatements in a securities registration statement. In order to be successful, one of the elements the plaintiff must prove is that the A. Plaintiff was in privity of contract with the issuer or that the issuer knew of the plaintiff. B. Plaintiff acquired the securities. C. Issuer acted negligently. D. Issuer acted fraudulently.

B An essential requirement of a private cause of action under the Securities Act of 1933 is that the injured party purchased the securities in question and suffered a loss. If the plaintiff has not acquired the securities and suffered a loss, there can be no recovery. Proving that the plaintiff was in privity of contract with the issuer or that the issuer knew of the plaintiff is not an element of a cause of action under the 1933 Act. Proving that the issuer acted negligently or fraudulently is not an element of a cause of action under the 1933 Act

Which of the following securities is exempt from registration under the Securities Act of 1933? A. Shares of nonvoting common stock, provided their par value is less than $1.00 B. A class of stock given in exchange for another class by the issuer to its existing stockholders without the issuer paying a commission C. Limited partnership interests sold for the purpose of acquiring funds to invest in bonds issued by the United States D. Corporate debentures that were previously subject to an effective registration statement, provided they are convertible into shares of common stock

B An exchange of one class of stock for another by the issuer to its existing shareholders such as stock splits or stock dividends qualifies as a transaction exempt from registration under the 1933 Securities Act.

Exemption from registration under the Securities Act of 1933 would be available for A. Promissory notes maturing in 12 months B. Securities of a bank C. Limited partnership interests D. Corporate bonds

B Any offer or sale of securities needs to be registered with the SEC pursuant to the Securities Act of 1933 unless the law specifically exempts the transaction or security. Securities of companies that are regulated by a federal agency, such as a bank regulated by the Federal Reserve System, are exempt from registration under the 1933 Act. Other securities that are exempt from registration under the 1933 Act are: Commercial paper (short term, maturing within 9 months) Securities issued by agencies of government Certain brokerage transactions Insurance contracts and policies Securities issued by not for profit organizations

With regard to estimated income tax, estates A. Must make quarterly estimated tax payments starting no later than the second quarter following the one in which the estate was established B. Are exempt from paying estimated tax during the estate's first two taxable years C. Are not required to make payments of estimated tax D. Must make quarterly estimated tax payments only if the estate's income is required to be distributed currently

B Estates are required to make estimated tax payments with respect to any taxable year ending two or more years after the date of the decedent's death.

Under the Section 10(b) Rule 10b-5 antifraud provisions of the Securities Exchange Act of 1934, which of the following conditions must a plaintiff prove to recover damages from an accountant? A. The plaintiff is in privity of contract with the accountant. B. The plaintiff relied on the accountant's intentional misstatement of material facts. C. The plaintiff is free from contributory negligence. D. The accountant acted without due diligence.

B In a suit under the Securities Exchange Act of 1934, Section 10(b) and Rule 10(b)-5, the plaintiff must prove reliance on the misstated financial statements to recover damages from an accountant. Additionally, the plaintiff may need to prove: Material misstatement or omission in the audited financial statements Loss (damages) - the plaintiff must have suffered a financial loss due to the misstatement Error was due to the reckless misconduct or intent to deceive (Scienter)

What is the standard that must be established to prove a violation of the anti-fraud provisions of Rule 10b-5 of the Securities Exchange Act of 1934? A. Negligence B. Intentional misconduct C. Criminal intent D. Strict liability

B In order to recover a loss, a seller or purchaser of securities must prove the defendant acted with the intent to defraud (scienter). The SEC may base actions under Section 10(b) on a showing of reckless disregard of the truth (gross negligence) rather than establish specific fraudulent intent. The Rule 10b-5 standard is not negligence, criminal intent, or strict liability.

Which of the following persons is not an insider of a corporation subject to the Securities Exchange Act of 1934 registration and reporting requirements? A. An attorney for the corporation B. An owner of 5% of the corporation's outstanding debentures C. A member of the board of directors D. A stockholder who owns 10% of the outstanding common stock

B Insiders are directors, officers, employees, and agents of the issuer, as well as others privy to information that is not available to the general public. An owner of debenture bonds does not gain access to corporate information which is unavailable to the general public. Therefore, the owner of debenture bonds is not an insider with respect to the corporation. An attorney is an agent of the corporation and is privy to corporate information not available to the general public so s/he qualifies as an insider. A director is specifically designated an insider due to the position s/he holds and information s/he has access to. Those stockholders owning 10% of equity securities registered under Section 12 of the 1934 Act are designated insiders by the SEC.

Pix Corp. is making a $6,000,000 stock offering. Pix wants the offering exempt from registration under the Securities Act of 1933. Which of the following provisions of the Act would Pix have to comply with for the offering to be exempt? A. Regulation A and Regulation D, Rule 504 B. Regulation A and Regulation D, Rule 506 C. Only Regulation D, Rule 506 D. Only Regulation A

B Pix Corp. making an offering of $6 MM both under Regulation A (Tier 1 and Tier 2) and Regulation D, Rule 506. As per JOBS Act 2012, the limit for offerings under Regulation A has increased from $5 million to $20 million for Tier 1 offering and $50 million for Tier 2 offering. Offerings exempt under Rule 506 can be of any dollar value and the compliance requirements include the following: - Offering to be completed within 12 months -Unlimited accredited investors but limited 35 non-accredited investors - SEC to be notified within 15 days of the first sale -General solicitation and advertising allowed only if all the purchasers are accredited investors. -Audited balance sheet to be provided to non-accredited investors -No resale for 1 year or 6 months if the issuer is a reporting company under the 1934 Act

Under Regulation D of the Securities Act of 1933, which of the following conditions apply to private placement offerings? The securities A. Cannot be sold for longer than a six month period B. Cannot be the subject of an immediate unregistered reoffering to the public, under Rules 504 and 506 C. Must be sold to fewer than 20 accredited institutional investors. D. Must be sold to fewer than 20 nonaccredited investors

B Private placement (or non-public offering) is a funding round of securities which are sold not through a public offering, but rather through a private offering, mostly to a small number of chosen investors. Rule 504 and 506 applies. The securities cannot be the subject of an immediate unregistered re offering to the public. Under rule 506, we cannot resell for 1 year (or 6 months if the issuer is a reporting company under the 1934 Act).

Which of the following transactions will be exempt from the full registration requirements of the Securities Act of 1933? A. All intrastate offerings B. All offerings made under Regulation A C. Any resale of a security purchased under a Regulation D offering D. Any stockbroker transaction

B Regulation A offerings are exempt from the registration requirements of Securities Act 1933. It applies to small offerings by issuers that raise up to $50 MM over a time period not exceeding 12 months. The registration requirements are i. notification to SEC within 15 days of the first sale ii. prospective investors be provided with offering circular which has far less extensive information that a prospectus iii. 2 years unaudited financial statements be provided to Tier-1 ($20 MM in a 12-month period) investors. iv. 2 years audited financial statements to be provided to Tier-2 ($50 MM in a 12-month period).

Regulation D of the Securities Act of 1933 A. Restricts the number of purchasers of an offering to 35 B. Permits an exempt offering to be sold to both accredited and nonaccredited investors C. Is limited to offers and sales of common stock that do not exceed $5 million D. Is exclusively available to small business corporations as defined by Regulation D

B Regulation D of the Securities Act of 1933 permits exempt offering to be sold to both accredited and non-accredited investors. There is no limit on the accredited investors but limits non-accredited investors to 35 under Rule 506.

Tork purchased restricted securities that were issued pursuant to Regulation D of the Securities Act of 1933. Which of the following statements is correct regarding Torks ability to resell the securities? A. Tork may resell the securities so long as the sale does involve interstate commerce. B. Tork may resell the securities as part of another transaction exempt from registration. C. Tork may not resell the securities if the certificates contain a legend indicating that they are unregistered securities. D. Tork may not resell the securities unless Tork obtains a written SEC exemption.

B Restricted securities may not be resold unless the transaction is registered or the securities are exempted from registration.

Harp Corp. is offering to issue $450,000 of its securities pursuant to Regulation D of the Securities Act of 1933. Harp is not required and does not plan to deliver a disclosure document in the states where the offering is being conducted. The exemption for small issues of $5,000,000 or less (Rule 504) under Regulation D A. Requires that the issuer be subject to the reporting requirements of the Securities Exchange Act of 1934 B. Does not require that any specific information be furnished to investors C. Permits the use of general solicitation D. Requires that each investor be a sophisticated investor or be represented by a purchaser representative

B Rule 504 of Regulation D allows an issuer to issue securities without the necessity of following the usual full registration procedures. Rule 504 is available to nonpublic companies not registered under the Securities Exchange Act of 1934. Under these simplified rules, no specific information is required to be delivered to investors, nor is it necessary that each investor be "sophisticated" or have a representative, and general solicitation is not allowed.

For an offering to be exempt under Regulation D of the Securities Act of 1933, Rule 506 requires which of the following? A. The SEC be notified within 10 days of the first sale. B. The offering be made without general advertising. C. All accredited investors receive the issuer's financial information. D. There be a maximum of 35 investors.

B Rule 506 requires that the offering is made without general advertising and limits the number of unaccredited investors to 35. The SEC must be notified within 15 days of the first sale. No disclosure is required to accredited investors. There is no limit on the number of accredited investors.

The alternative minimum tax (AMT) is computed as the A. Excess of the regular tax over the tentative AMT B. Excess of the tentative AMT over the regular tax C. The tentative AMT plus the regular tax D. Lesser of the tentative AMT or the regular tax

B Section 55(a) provides that the alternative minimum tax is the excess, if any, of the tentative minimum tax for the taxable year over the regular tax for the taxable year.

Astor, a cash-basis taxpayer, died on February 3, year 1. An estate tax was in effect for year 1. During year 1, the estates executor made a distribution of $12,000 from estate income to Astors sole heir and adopted a calendar year to determine the estates taxable income. The following additional information pertains to the estates income and disbursements for year 1: Estate Income: Taxable interest $65,000 Net long-term capital gains allocable to corpus 5,000 Estate Disbursements: Administrative expenses attributable to taxable income 14,000 Charitable contributions from gross income to a public charity, made under the terms of the will 9,000 Astors executor does not intend to file an extension request for the estate fiduciary income tax return. By what date must the executor file the Form 1041, U.S. Fiduciary Income Tax Return, for the estates calendar year 1? A. Wednesday, March 15, year 2 B. Monday, April 17, year 2 C. Thursday, June 15, year 2 D. Friday, September 15, year 2

B Section 6012(a)(3) requires an income tax return for every estate that has gross income of $600 or more for the taxable year. Section 6012(b)(4) states that a return of an estate shall be made by the fiduciary thereof (i.e., the executor). Section 6072(a) states that returns required to be filed by §6012 are to be filed on or before the 15th day of April following the close of the taxable year if the taxpayer is a calendar year taxpayer. Section 7503 provides that if the last day for filing is on a Saturday, Sunday, or legal holiday, the return will be considered filed in a timely manner if it is filed by the succeeding day after the due date that is not a Saturday, Sunday, or legal holiday.

Coffee Corp., a publicly-held corporation, wants to make an $8,000,000 exempt offering of its shares as a private placement offering under Regulation D, Rule 506, of the Securities Act of 1933. Coffee has more than 500 shareholders and assets in excess of $1 billion, and has its shares listed on a national securities exchange. Which of the following statements is/are correct? I. Shares sold under a Regulation D, Rule 506 exempt offering may only be purchased by accredited investors. II. Shares sold under a Regulation D, Rule 506 exempt offering may be purchased by any number of investors provided there are no more than 35 non-accredited investors. A. I only B. II only C. Both I and II D. Neither I nor II

B Shares sold under a Regulation D, Rule 506 exempt offering may be purchased by any number of investors provided there are no more than 35 nonaccredited investors.

The prospectus for the sale of securities of a not-for-profit corporation contained material misrepresentations due to the negligence of the person who prepared the financial statements. As a result of the misrepresentations, purchasers of the shares lost their investment. Do the anti-fraud provisions of the Securities Act of 1933 apply in this situation? A. Yes, because the securities are required to be registered B. Yes, because the misrepresentations were material C. No, because the securities are exempt from registration D. No, because only the issuer was negligent

B The 1933 Act generally prohibits the use of fraud by any person who offers or sells a security in inter¬state commerce. This prohibition applies to all securities, whether or not those securities must be registered. The Act specifically prohibits (1) use of any device, scheme, or artifice to defraud; (2) obtaining money or property by means of an untrue statement of material fact or by an omission of a material fact; and (3) engaging in any trans¬action or practice that would operate as a fraud or deceit on the purchaser. Material misrepresentation is gross negligence; gross negligence is fraud.

Under the Securities Exchange Act of 1934, the SEC is responsible for all of the following activities except A. Requiring disclosure of facts concerning offerings of securities listed on national securities exchanges B. Prosecuting criminal violations of federal securities laws C. Regulating the activities of securities brokers D. Investigating securities fraud

B The SEC is responsible for requiring disclosure of facts concerning offerings of securities listed on national exchanges, for regulating the activities of securities brokers, and for investigating securities fraud. The SEC, however, is not responsible for prosecuting criminal violations of federal securities laws. The SEC may report such violations to proper authorities, who then may prosecute.

Which of the following are exempt from the registration requirements of the Securities Act of 1933? A. All industrial development bonds issued by municipalities B. Stock of a corporation offered and sold only to residents of the state in which the issuer was incorporated and doing all of its business C. Bankers acceptances with maturities at the time of issue ranging from one to two years D. Participation interests in a money market fund that consists wholly of short-term commercial paper

B The Securities Act of 1933 generally requires all securities to be registered before they may be offered or sold to the public except for those securities which the Act exempts. One of the available exemptions, known as the Intrastate exemption, is for securities which are part of an issue offered and sold only to persons who are residents of the same state by an issuer also residing and doing business within that same state.

The reporting requirements of the Securities Exchange Act of 1934 and its rules A. Apply only to issuers, underwriters, and dealers B. Apply to a corporation that registered under the Securities Act of 1933 but that did not register under the Securities Exchange Act of 1934 C. Require all corporations engaged in interstate commerce to file an annual report D. Require all corporations engaged in interstate commerce to file quarterly audited financial statements

B The Securities Exchange Act of 1934 requires corporations whose securities are traded on a national security exchange or whose assets are in excess of $10 million, and which have a class of equity security held on record by 500 or more persons, to register their securities. The reporting requirements also extend to national securities exchanges, and brokers and dealers engaged in interstate commerce. The standard for registration is not solely dependent upon whether or not the corporations are engaged in interstate commerce.

Which of the following factors, by itself, requires a corporation to comply with the reporting requirements of the Securities Exchange Act of 1934? A. Six hundred employees B. Shares listed on a national securities exchange C. Total assets of $2 million D. Four hundred holders of equity securities

B The Securities Exchange Act of 1934 requires that certain entities comply with its filing requirements. These include corporations whose securities are traded on a national exchange, and those with assets in excess of $10 million and which have a class of equity security held by 500 or more persons. The number of employees of the corporation is irrelevant to compliance with the reporting requirements of the Securities Exchange Act of 1934.

Under the Securities Act of 1933, which of the following statements most accurately reflects how securities registration affects an investor? A. The investor is provided with information on the stockholders of the offering corporation. B. The investor is provided with information on the principal purposes for which the offering's proceeds will be used. C. The investor is guaranteed by the SEC that the facts contained in the registration statement are accurate. D. The investor is assured by the SEC against loss resulting from purchasing the security.

B The intent of the Securities Act of 1933 is to ensure potential investors are provided with sufficient information about the securities being offered such that they can make informed decisions. This information includes disclosures on the principal purposes for which the offering's proceeds will be used. Other information that is disclosed are: (1) Names and addresses and amount of securities held by directors, officers, underwriters, and shareholders with at least 10% of the stock (2) Company's debt (3) Company's operating history and pending litigation

The registration requirements of the Securities Act of 1933 apply to A. The issuance of a stock dividend without commissions or other consideration paid B. The issuance of stock warrants C. Securities issued by a federally chartered savings and loan association D. Securities issued by a common carrier regulated by the Interstate Commerce Commission

B The issuance of stock warrants is subject to the Section 5 registration requirements of the Securities Act of 1933. Security swaps or distributions by the issuer with its existing security holders exclusively, where no commission or other remuneration is given, are exempted from the registration requirements of the 1933 Act. Securities issued by governments or quasi-governmental authorities, such as banks, carriers, building and loan associations, and farm cooperatives, are exempt from the Act's registration requirements.

Alan Maade, a U.S. citizen, died on March 1, leaving an adjusted gross estate with a fair market value of $1,600,000 at the date of death. Under the terms of Alan's will, $475,000 was bequeathed outright to his widow, free of all estate and inheritance taxes. The remainder of Alan's estate was left to his mother. Alan made no taxable gifts during his lifetime. In computing the taxable estate, the executor of Alan's estate should claim a marital deduction of A. $250,000 B. $475,000 C. $675,000 D. $1,125,000

B The marital deduction is allowed for property included in the deceased spouse's gross estate that passes or has passed to the surviving spouse. The marital deduction is unlimited in amount [§2056(a)].

On May 7, year 4, Kemp, a director of Ladel Corp., purchased 100 shares of Ladel's common stock. Shortly thereafter, Kemp sold the stock at a profit. In order to hold Kemp liable under the short- swing profits provisions of the Securities Exchange Act of 1934, it must be shown that A. Kemp used or had access to inside information. B. Kemp sold the stock within a period of less than six months. C. Kemp was also a director at the time the stock was sold. D. Kemp's purchase and subsequent sale of the stock involved interstate commerce.

B The short-swing profits provisions of the 1934 Act are intended to prevent ''insiders'' from using privileged, inside information to make quick profits from transacting in the issuer's securities. The Act provides that any profit realized by an insider from transacting in the issuer's securities within a period of less than six months shall inure to or be recoverable by the issuer. "Insiders" include officers and directors of the issuing corporation. The Act does not require proof that the insider used or had access to insider information. The 1934 Act does not require a showing that insider trading involved interstate commerce. Rather, the short-swing provisions apply to insiders of all corporations whose securities are traded on a national securities exchange or whose assets exceed $10 million and have equity securities held by at least 500 people.

Pix Corp. is making a $6,000,000 stock offering. Pix wants the offering exempt from registration under the Securities Act of 1933. Which of the following requirements would Pix have to comply with when selling the securities? A. No more than 35 investors B. No more than 35 nonaccredited investors C. Accredited investors only D. Nonaccredited investors only

B Under Rule 506 of Regulation D, there is no limit on the number of accredited investors, but sales to non-accredited investors are limited to a maximum of 35.

Under the Securities Act of 1933, which of the following statements is(are) correct regarding the purpose of registration? I. The purpose of registration is to allow for the detection of management fraud and prevent a public offering of securities when management fraud is suspected. II. The purpose of registration is to adequately and accurately disclose financial and other information upon which investors may determine the merits of securities. A. I only B. II only C. Both I and II D. Neither I nor II

B Under the Securities Act of 1933, securities need to be registered with SEC so that there is adequate and accurate disclosure of financial and other information upon which investors may determine the merits of securities.

Which of the following statements is correct regarding the proxy solicitation requirements of Section 14(a) of the Securities Exchange Act of 1934? A. A corporation does not have to file proxy revocation solicitations with the SEC if it is a reporting company under the Securities Exchange Act of 1934. B. Current unaudited financial statements must be sent to each stockholder with every proxy solicitation. C. A corporation must file its proxy statements with the SEC if it is a reporting company under the Securities Exchange Act of 1934. D. In a proxy solicitation by management relating to election of officers, all stockholder proposals must be included in the proxy statement.

C A corporation must file its proxy statements with the SEC if it is a reporting company under the Securities Exchange Act of 1934. Current audited financial statements must be sent to each stockholder with every proxy solicitation. Not all stockholder proposals must be included in the proxy statements.

Which of the following may not be deducted in the computation of alternative minimum taxable income of an individual? A. Traditional IRA account contribution B. One-half of the self-employment tax deduction C. Standard deduction D. Charitable contributions

C AMT is calculated starting from taxable income. The Standard Deduction is one of the adjustments and preferences to be added back to taxable income to get to alternative minimum taxable income. The IRA account contribution deduction, the one-half of the self-employment tax deduction, and the charitable contribution deduction are not adjustments or preferences.

Rita Ryan died leaving a will naming her children, John and Dale, as the sole beneficiaries. In her will, Rita designated John as the executor of her estate and excused John from posting a bond as executor. At the time of Rita's death, she owned a parcel of land with her sister, Ann, as joint tenants with right of survivorship. In general, John as executor, must A. Post a bond despite the provision to the contrary in Rita's will B. Serve without compensation because John is also a named beneficiary in the will C. File a final account of the administration of the estate D. Relinquish the duties because of the conflict of interest as executor and beneficiary

C An executor must file a final account of the administration of an estate. Generally, the terms of a valid will control its administration. Thus, John need not post bond. Whether the named executor is a beneficiary does not affect her/his potential right to reasonable compensation, nor does it require her/him to relinquish the duties of the appointment.

Under Regulation D of the Securities Act of 1933, what is the maximum time period during which an exempt offering may be made? A. Three months B. Six months C. Twelve months D. Twenty-four months

C An exempt offering under Regulation D of The Securities Act of 1933, may be made for twelve months.

Which of the following facts will result in an offering of securities being exempt from registration under the Securities Act of 1933? A. The securities are nonvoting preferred stock. B. The issuing corporation was closely held prior to the offering. C. The sale or offer to sell the securities is made by a person other than an issuer, underwriter, or dealer. D. The securities are AAA-rated debentures that are collateralized by first mortgages on property that has a market value of 200% of the offering price.

C Any offer or sale of securities needs to be registered with the SEC pursuant to the Securities Act of 1933, unless the law specifically exempts the transaction or security. Casual sale transactions are exempt from registration. They refer to sales by persons not connected with the issuing company. Hence offers by persons other than an issuer, underwriter, dealer, director, officer or owner of at least 10% of any class of shares, are exempt from registration.

The antifraud provisions of Rule 10b-5 of the Securities Exchange Act of 1934 A. Apply only if the securities involved were registered under either the Securities Act of 1933 or the Securities Exchange Act of 1934 B. Require that the plaintiff show negligence on the part of the defendant in misstating facts C. Require that the wrongful act must be accomplished through the mail, any other use of interstate commerce, or through a national securities exchange D. Apply only if the defendant acted with intent to defraud

C As per the liability provisions of Section 10, Rule 10 b-5 of the Securities Exchange Act of 1934, it is unlawful to make any untrue statement of a material fact or to omit to state a material fact. It prohibits fraud in connection with the purchase or sale of any security. Rule 10b-5 applies whether or not the securities are of a registered company, it applies even if registration is not required. Anyone who sells or buys securities using fraud can be liable. Since this is a Federal Law, anyone who commits fraud through agencies that are regulated by the government such as mail, interstate commerce or national exchange, has violated Section 10, Rule 10b-5 and is subject to prosecution.

When computing alternative minimum tax, the individual taxpayer may take a deduction for which of the following items? A. Standard Deduction B. Real Estate Property Tax C. Casualty losses D. State Income Taxes

C Casualty losses are not added back in the Alternative Minimum Tax Calculation. Therefore, they are allowed as a deduction. Option (a) is incorrect as standard deductions are added back in the AMT calculation ; therefore, they are not allowed as a deduction. Option (b) is incorrect because real estate property taxes are added back in the AMT calculation. Therefore, they are not allowed as a deduction. Option (d) is incorrect as State income taxes are added back in the AMT calculation. Therefore, they are not allowed as a deduction.

If the executor of a decedent's estate elects the alternate valuation date and none of the property included in the gross estate has been sold or distributed, the estate assets must be valued as of how many months after the decedent's death? A. 12 B. 9 C. 6 D. 3

C If the executor elects and the assets were not sold or distributed within 6 months after the date of the decedent's death, the assets in the decedent's gross estate are to be valued 6 months after the date of the decedent's death.

Dean, Inc., a publicly traded corporation, paid a $10,000 bribe to a local zoning official. The bribe was recorded in Dean's financial statements as a consulting fee. Dean's unaudited financial statements were submitted to the SEC as part of a quarterly filing. Which of the following federal statutes did Dean violate? A. Federal Trade Commission Act B. Securities Act of 1933 C. Securities Exchange Act of 1934 D. North American Free Trade Act

C In Securities Exchange Act of 1934 there is a liability provisions of Section 10, Rule 10 b-5, wherein it is unlawful to make any untrue statement of a material fact or to omit to state a material fact. Rule 10b-5 applies whether or not the securities are of a registered company. Anyone who sells or buys securities using fraud can be liable. Thus, recording a bribe as a consulting fee is making an untrue statement. Therefore, Dean Inc. is liable under Securities Exchange Act of 1934.

Mike and Carol, a married couple, have two assets at the time of Mike's death: a $10,000,000 life insurance policy owned by Mike, naming Carol as the sole beneficiary, and $8,000,000 of real estate owned by the couple as joint tenants with right of survivorship. What is the amount of the marital deduction to Mike's estate for these two assets? A. $9,000,000. B. $10,000,000. C. $14,000,000. D. $18,000,000.

C It is usually assumed that all property owned by one spouse will be transferred to the surviving spouse upon death. Mike's estate will include the life insurance proceeds of the policy he owned as well as half of the real estate owned jointly with right of survivorship for a total of $14,000,000. All of the property is transferred to his spouse, which means the full $14,000,000 counts for the marital deduction. $10,000,000 Life insurance policy + $4,000,000 of Real estate (50% of $8,000,000) = $14,000,000. The right of survivorship is an attribute of several types of joint ownership of property, most notably joint tenancy and tenancy in common. When jointly owned property includes a right of survivorship, the surviving owner automatically absorbs a deceased owner's share of the property (i.e., the other 50%).

Farr, an unmarried taxpayer, had $70,000 of adjusted gross income and the following deductions for regular income tax purposes: Home mortgage interest on a loan to acquire a principal residence $11,000 State income taxes $2,000 What are Farr's total allowable itemized deductions for computing alternative minimum taxable income? A. $0 B. $2,000 C. $11,000 D. $13,000

C Mortgage interest due to acquisition indebtedness, casualty losses due to a federally-declared disaster, medical expenses above a 7.5% threshold limitation, and charitable contributions are allowed for alternative minimum tax (AMT) purposes. State and local income taxes, as well as real estate taxes, are disallowed for AMT and are instead AMT add-backs.

Don Mills, a single taxpayer, had $70,000 in taxable income. Mills had no tax preferences. His itemized deductions were as follows: State and local income taxes $5,000 Home mortgage interest on loan to acquire residence $6,000 Medical expenses in excess of 7.5% of AGI $2,000 What amount did Mills report as alternative minimum taxable income before the AMT exemption? A. $72,000 B. $77,000 C. $75,000 D. $83,000

C Section 56(b)(1)(A)(ii) disallows any deduction for taxes described in §164(a). Section 164(a)(3) includes state and local income taxes. As such, state and local income taxes are not deductible in arriving at AMT income. Section 56(b)(1)(C)(i) disallows the deduction for qualified residence interest in arriving at AMT income unless the taxpayer used the loan proceeds to improve the residence. This means that the home mortgage interest on a loan to acquire the residence is deductible in arriving at AMT income and accordingly does not have to be added back to taxable income. Medical expenses in excess of 7.5% of AGI are allowed for AMT purposes and do not need to be added back. Section 55(b)(2) defines AMT income as the taxable income of the taxpayer, determined with regard to the adjustments required by §§56 and 58 and increased by the preferences described in §57. Taxable income, as defined in §63(a), is gross income minus deductions. Section 56(b)(1)(E) disallows the standard deduction in arriving at AMT income. Don Mills' AMT income before the alternative minimum tax exemption is determined as follows: Taxable income $70,000 State and local income taxes $5,000 AMT income before the alternative minimum tax exemption $75,000

Which of the following is least likely to be considered a security under the Securities Act of 1933? A. Stock options B. Warrants C. General partnership interests D. Limited partnership interests

C Securities are defined as investments in an enterprise where the investor intends to make a profit through managerial efforts of others, rather than through his own efforts. A general partnership interest is not a security since it involves the management of the company.

An original issue of transaction exempt securities was sold to the public based on a prospectus containing intentional omissions of material facts. Under which of the following federal securities laws would the issuer be liable to a purchaser of the securities? I. The anti-fraud provisions of the Securities Act of 1933 II. The anti-fraud provisions of the Securities Exchange Act of 1934 A. I only B. II only C. Both I and II D. Neither I nor II

C The 1933 Act generally prohibits the use of fraud by any person who offers or sells a security in interstate commerce. This prohibition applies to all securities, whether or not those securities must be registered. The Act specifically prohibits (1) use of any device, scheme, or artifice to defraud; (2) obtaining money or property by means of an untrue statement of material fact or by an omission of a material fact; and (3) engaging in any transaction or practice that would operate as a fraud or deceit on the purchaser. Section 10(b) of the 1934 Act makes it unlawful for any person to use interstate commerce or any facility of any national security exchange to directly or indirectly affect a short sale. It also makes it unlawful for any person to use or employ in connection with the purchase or sale of any security any deceptive or manipulative practice in contrary to the rules or regulations prescribed by the SEC as necessary to protect the public interest

Adler Inc. is a reporting company under the Securities Exchange Act of 1934. The only security it has issued is voting common stock. Which of the following statements is correct? A. Because Adler is a reporting company, it is not required to file a registration statement under the Securities Act of 1933 for any future offerings of its common stock. B. Adler need not file its proxy statements with the SEC because it has only one class of stock outstanding. C. Any person who owns more than 10% of Adler's common stock must file a report with the SEC. D. It is unnecessary for the required annual report (Form 10K) to include audited financial statements.

C The Securities Exchange Act of 1934 regulates stock purchases and tender offers by persons acquiring more than 5% of a company's equity securities. Hence, any person who owns more than 5% of a reporting company's common stock must file a report with the SEC. A reporting company under the 1934 Act is not exempt from the filing requirements of the 1933 Act. Adler is required to file its proxy statements with the SEC at least 10 days before such information is sent to the stockholders. The required annual report (Form 10-K) must contain financial statements audited by independent public accountants.

Which of the following is (are) deductible from a decedent's gross estate? I. Expenses of administering and settling the estate II. State inheritance or estate tax A. I only B. II only C. Both I and II D. Neither I nor II

C The expenses of administering an estate are deductible under §2053(a)(2). The state inheritance or estate tax is also deductible.

Under the provisions of a decedent's will, the following cash disbursements were made by the estate's executor: I. A charitable bequest to the American Red Cross II. Payment of the decedent's funeral expenses What deduction(s) is(are) allowable in determining the decedent's taxable estate? A. I only B. II only C. Both I and II D. Neither I nor II

C The gross estate is reduced by non-discretionary deductions to arrive at the adjusted gross estate, which is further reduced by discretionary deductions to obtain the taxable estate. Funeral expenses are non-discretionary deductions. Charitable deductions are discretionary deductions.

Under the liability provisions of Section 18 of the Securities Exchange Act of 1934, for which of the following actions would an accountant generally be liable? A. Negligently approving a reporting corporation's incorrect internal financial forecasts B. Negligently filing a reporting corporation's tax return with the IRS C. Intentionally preparing and filing with the SEC a reporting corporation's incorrect quarterly report D. Intentionally failing to notify a reporting corporation's audit committee of defects in the verification of accounts receivable

C Under Section 18 of The Securities Exchange Act of 1934, an accountant can be held liable for intentionally making false and/or misleading statements in a registration statement or report led under the Act. As such, by intentionally preparing and filing with SEC a reporting corporation's incorrect quarterly report would make an accountant liable for his actions.

Under the Securities Act of 1933, which of the following statements is correct concerning a public issuer of securities who has made a registered offering? A. The issuer is required to distribute an annual report to its stockholders. B. The issuer is subject to the proxy rules of the SEC. C. The issuer must file an annual report (Form 10-K) with the SEC. D. The issuer is not required to file a quarterly report (Form 10-Q) with the SEC, unless a material event occurs.

C Under the Securities Act of 1933, an issuer of securities who has made a registered offering is required to meet the reporting requirements of the 1934 Act for the year following the registration, which include filing an annual report with the SEC. The 1933 Act does not require the issuance of an annual report to the stock holders. The requirements for filing form 10-Q as well as rules pertaining to proxy solicitation are governed by the Securities Exchange Act of 1934, not the 1933 Act.

Craven was the CEO of Engines Plus, Inc., a publicly-traded company. Hanson, CPA, was the long-time controller for the company. Engines Plus was about to be sued in a class action suit for defective engines. Only Craven knew about the impending suit. On March 1, Craven told Hanson about the impending suit. On March 2, Craven told Spore, an old friend, about the suit. Spore knew that Craven was the CEO of Engines Plus. On March 3, Craven, Hanson, and Spore all sold the stock they owned in Engines Plus. On March 4, the class action suit was filed and the value of Engine Plus stock plummeted. Under the insider trading provisions of the Securities Exchange Act of 1934, which of the following statements is correct regarding Craven, Hanson, and Spore? A. Only Craven would be considered an insider having knowledge of material, nonpublic information. B. Craven, Hanson, and Spore would all be considered insiders with knowledge of material, non-public information. C. Craven and Hanson would be considered insiders and Spore would be considered a tippee, all with knowledge of material, nonpublic information. D. Craven would be considered an insider and Hanson and Spore would be considered tippees, all with knowledge of material, non-public information.

C Under the insider trading provisions of the Securities Exchange Act of 1934, Craven and Hanson would be considered insiders and Spore would be considered a 'tippee', all with knowledge of material, non- public information. Craven and Hanson are clearly guilty. As the CEO and controller of the company, respectively, both were privy to the impending lawsuit and sold their stock as a result. Spore also sold his stock, and as the friend of the CEO of Engine's Plus, Inc, he would be considered a tippee.

Which of the following statements is correct concerning corporations subject to the reporting requirements of the Securities Exchange Act of 1934? A. The annual report (form 10-K) need not include audited financial statements. B. The annual report (form l0-K) must be filed with the SEC within 20 days of the end of the corporation's fiscal year. C. A quarterly report (form 10-Q) need only be filed with the SEC by those corporations that are also subject to the registration requirements of the Securities Act of 1933. D. A current report (form 8-K) must be filed with the SEC within four days of a materially important event occurring on a weekday

D A corporation subject to the reporting requirements of the Securities Exchange Act of 1934 is required to file certain reports with the SEC. An annual report (Form 10-K) must be filed for each fiscal year within 90 days of the close of that fiscal year. These reports must contain financial statements audited by independent public accountants. In addition, reports must be filed quarterly (Form 10-Q) within 45 days after the close of each quarter, and current reports (Form 8-K) must be filed within four days of a material event of importance to investors, not previously reported, occurred. If a material event occurs on a weekend, the deadline is four business days afterwards. These reports need not be audited. The application of these reporting requirements does not depend upon whether or not the corporation is also subject to the registration requirements of the Securities Act of 1933.

A preliminary prospectus, permitted under SEC Regulations, is known as the A. Unaudited prospectus B. Qualified prospectus C. "Blue-sky" prospectus D. "Red-herring" prospectus

D A preliminary prospectus called a "red-herring" prospectus is permitted under SEC Regulations. It is a prospectus that has been filed but is missing certain unavailable information. It is generally issued during the 20-day waiting period after filing for registration but before it becomes effective.

Rey Corp.'s management intends to solicit proxies relating to its annual meeting at which directors will be elected. Rey is subject to the registration and reporting requirements of the Securities Exchange Act of 1934. As a result, Rey must furnish its shareholders with A. A copy of its registration statement and bylaws. B. A preliminary copy of its proxy statement at the same time it is filed with the SEC. C. An annual report containing its audited statements of income for the five most recent years. D. An annual report containing its audited balance sheets for the two most recent years.

D A solicitation made on behalf of management, relating to an annual meeting at which directors are to be elected, must contain an annual report with certified financial statements for the last two fiscal years. A copy of the registration statement and bylaws is not required to be furnished to the corporation's shareholders in connection with a proxy solicitation. Before a proxy may be solicited, Rey must furnish the SEC with a proxy statement at least 10 days before it is sent to its security holders

A tombstone advertisement A. May be substituted for the prospectus under certain circumstances B. May contain an offer to sell securities C. Notifies prospective investors that a previously-offered security has been withdrawn from the market and is, therefore, effectively "dead" D. Makes known the availability of a prospectus

D A tombstone advertisement announces the availability of a prospectus on a potential investment and not be itself considered an offer to sell. It is issued during the 20-day waiting period, i.e., after the filing of registration but before it becomes effective.

The credit for prior year alternative minimum tax liability may be carried A. Forward for a maximum of 5 years B. Back to the 3 preceding years or carried forward for a maximum of 5 years C. Back to the 3 preceding years D. Forward indefinitely

D AMT created on account of temporary differences (timing differences) is allowed to be carried forward indefinitely and serve as a credit against regular tax in subsequent taxable years. Recognition of gain on exercise of Incentive Stock Options (ISO), difference in depreciation methods, treatment of long-term construction income are all examples of temporary differences that give rise to the credit. Prior year AMT credit reduces the future regular tax and does not affect future AMT calculations or reduce future AMT tax. Options (a), (b) and (c) are incorrect because AMT credit cannot be carried back. It only carried forward indefinitely

Following are the fair market values of Walds assets at the date of death: Personal effects and jewelry $150,000 Land bought by Wald with Walds funds five years prior to death and held with Walds sister as joint tenants with right of survivorship $1,800,000 The executor of Walds estate did not elect the alternate valuation date. The amount includible as Walds gross estate in the federal estate tax return is A. $150,000 B. $1,150,000 C. $1,800,000 D. $1,950,000

D All property owned by the decedent at the time of death is included in the gross estate by §2033. No distinction is made between personal effects and those belonging to a business interest. Wald's gross estate includes personal items and jewelry as well as the jointly held land. Note: 100% of property if jointly held with non-spouse, less other owner's contribution is included in Gross Estate. The purpose is to prevent taxpayers to bypass estate taxes by using joint ownership. Since Wald paid the entire amount for the land, the other owner's contribution (Wald's Sister) is $0 and the entire FMV of Land would be included in Wald's Estate.

Which of the following statements about the alternative minimum tax (AMT) of an individual is correct? A. It is determined from the tax rate schedules and computed on income that exceeds $100,000. B. It is computed on an individual's regular taxable income at a rate of 28%. C. It is calculated after certain tax preference items that may be used as an alternative to the regular tax are deducted. D. AMT credits may be carried forward to future tax years.

D Alternative Minimum Tax (AMT) is a supplemental tax to ensure that high-income individuals pay a minimum amount of tax and not take benefits of huge tax deductions. As a result, there are some temporary timing differences between the regular tax and the AMT, giving rise to AMT credit. That is, an individual taxpayer may be subject to AMT but not regular tax in a year, giving rise to AMT credit. This credit can be carried forward to future years and utilized against regular tax liability. AMT credits arise due to temporary differences such as passive activity losses, incentive stock options, etc.

One of the elements necessary to recover damages if there has been a material misstatement in a registration statement filed under the Securities Act of 1933 is that the A. Issuer and plaintiff were in privity of contract with each other. B. Issuer failed to exercise due care in connection with the sale of the securities. C. Plaintiff gave value for the security. D. Plaintiff suffered a loss.

D An action brought under the 1933 Securities Act does not require that the injured party prove that s/he relied on the misleading information, but s/he is required to prove s/he actually incurred a loss. Privity of contract is not a requirement as the 1933 Act is designed to protect the "investing public." The plaintiff does not have to prove negligence in the issuance of the securities, only that the misleading information was material. Any person acquiring securities covered by the registration statement is covered by the Act. There is no requirement that value be given for the security.

World Corp. wanted to make a public offering of its common stock. On May 10, World prepared and filed a registration statement with the SEC. On May 20, World placed a "tombstone ad" announcing that it was making a public offering. On May 25, World issued a preliminary prospectus and the registration statement became effective on May 30. On what date may World first sell the shares? A. May 10 B. May 20 C. May 25 D. May 30

D Before registration with the SEC no sale of securities may occur. Once the SEC deems the registration is complete, the registration is "effective" 20 days after filing. Securities may be sold after effective date of registration. Since May 30 is the date the registration became effective, World Corp. can start selling shares as of that date.

Under Section 12 of the Securities Exchange Act of 1934, in addition to companies whose securities are traded on a national exchange, what class of companies is subject to the SEC's continuous disclosure system? A. Companies with annual revenues in excess of $5 million and 2,000 or more shareholders B. Companies with annual revenues in excess of $10 million and 2,000 or more shareholders C. Companies with assets in excess of $5 million and 2,000 or more shareholders D. Companies with assets in excess of $10 million and 2,000 or more shareholders

D Corporations whose securities are traded on a national security exchange or whose assets are in excess of $10 million and have a class of equity security held on record by 2,000 or more persons or 500 persons who are not accredited investors must register under the 1934 Act.

On their joint tax return, Sam and Joann, both 50 years old, had adjusted gross income (AGI) of $150,000 and claimed the following itemized deductions: Real estate taxes of $3,000 State income taxes of $5,000 Charitable contributions (cash) of $25,000 Based on these deductions, what would be the amount of AMT add-back adjustment in computing alternative minimum taxable income? A. $22,000 B. $3,000 C. $35,000 D. $8,000

D For purposes of AMT, some itemized deductions are added back to regular taxable income. These include State and Local income tax and Real Estate tax. Charitable contributions are not an AMT add- back adjustment. Real estate taxes $3,000 State income taxes $5,000 Total add-back adjustment $8,000

Rona, a single taxpayer must add-back the following to calculate alternative minimum tax A. Standard deduction B. Real estate taxes paid C. State income taxes paid D. All of the above

D For purposes of AMT, some itemized deductions are added back to regular taxable income. These include State and Local income tax and Real Estate tax. If a taxpayer takes the standard deduction instead, then that would be added-back for AMT.

Which of the following securities would be regulated by the provisions of the Securities Act of 1933? A. Securities issued by not-for-profit, charitable organizations B. Securities guaranteed by domestic governmental organizations C. Securities issued by savings and loan associations D. Securities issued by insurance companies

D From the given options, only securities issued by insurance companies require registration under the 1933 Act. The following securities are exempt from registration: Commercial paper (short-term maturing in 9 months) Securities issued by agencies of government such as railroads Securities issued by regulated industries such as banks Certain brokerage transactions Insurance contracts and policies Securities issued by not-for-profit organizations Options (A) and (B) are incorrect because they are securities that are specifically exempt from registration under the Securities Act of 1933. Option (C) is incorrect because securities issued by savings and loan associations are regulated by the Federal Reserve System, a federal agency. Securities issued by companies already regulated by federal agencies are exempt from registration.

What is the due date of a federal estate tax return (Form 706), for a taxpayer who died on May 15, year 2, assuming that a request for an extension of time is not filed? A. September 15, year 2 B. December 31, year 2 C. January 31, year 3 D. February 15, year 3

D If an extension is not requested, Form 706, US Estate (and Generation-Skipping Transfer) Tax Return, is due nine months after the date of death. The alternative valuation date is six months after the date of death. Form 1041, US Income Tax Return for Estates and Trusts, is due on the 15th day of the fourth month following the close of the tax year—April 15th for calendar year entities.

According to the Securities Act of 1933, which of the following statements is correct regarding an issuer of securities? A. All securities issuers must provide potential investors with a prospectus containing specified information. B. An issuer is permitted to advertise an initial offering of securities only through distribution of the prospectus. C. All securities issuers must register the securities offering with the Securities and Exchange Commission (SEC). D. If an issuer sells a security and fails to meet certain disclosure requirements, the purchaser may sell it back to the issuer and recover the price paid.

D If an issuer sells a security and fails to meet disclosure requirements of The Securities Act of 1933, the purchaser may request rescission of the sale.

Proceeds of a life insurance policy payable to the estate's executor, as the estate's representative, are A. Includible in the decedent's gross estate only if the premiums had been paid by the insured B. Includible in the decedent's gross estate only if the policy was taken out within three years of the insured's death under the "contemplation of death" rule C. Never includable in the decedent's gross estate D. Always includable in the decedent's gross estate

D Proceeds of insurance on the life of the decedent, payable to the executor as the estate's representative are always includible in the gross estate under §2042(1).

Miner Corp. wants to make a $1 million public stock offering under the exempt transaction limited offering provisions of the Securities Act of 1933. What must Miner do to comply with the Act? A. File a registration statement B. Advertise the offering to nonaccredited investors C. Issue a "red herring" prospectus D. Notify SEC within 15 days of first sale

D Rule 504 of Regulation D permits non public and public companies to offer, without fulfilling the Securities Act of 1933 registration requirements, up to $5 million in a 12-month period. These sales can be made to an unlimited number of accredited investors and nonaccredited purchasers.

In connection with a "buy-sell" agreement funded by a cross-purchase insurance arrangement, business associate Adam bought a policy on Burrs life to finance the purchase of Burrs interest. Adam, the beneficiary, paid the premiums and retained all incidents of ownership. On the death of Burr, the insurance proceeds will be A. Includible in Burrs gross estate, if Burr owns 50% or more of the stock of the corporation B. Includible in Burrs gross estate only if Burr had purchased a similar policy on Adams life at the same time and for the same purpose C. Includible in Burrs gross estate, if Adam has the right to veto Burrs power to borrow on the policy that Burr owns on Adams life D. Excludable from Burrs gross estate

D Section 2042(2) indicates that insurance proceeds will be includable in the gross estate to the extent the decedent possessed any "incidents of ownership" By the facts given in the problem, Burr did not have any such ownership in the insurance policy and it belonged strictly to Adam. Therefore, the insurance proceeds would be excludable from Burrs gross estate. The percentage of ownership of the business interest does not determine what should be included in the gross estate.

Under the Securities Exchange Act of 1934, which of the following types of instruments is excluded from the definition of "securities"? A. Investment contracts B. Convertible debentures C. Nonconvertible debentures D. Certificates of deposit

D Securities are defined as investments in an enterprise, where the investor intends to make a profit through the managerial efforts of others, rather than through his own efforts. A certificate of deposit is issued by a bank to a person depositing money for a specified length of time at a specified rate of interest; therefore, it is not a security.

Universal Corp. intends to sell its common stock to the public in an interstate offering that will be registered under the Securities Act of 1933. Under the Act, A. Universal can make offers to sell its stock before filing a registration statement, provided that it does not actually issue stock certificates until after the registration is effective. B. Universal registration statement becomes effective at the time it is filed, assuming the SEC does not object within 20 days thereafter. C. A prospectus must be delivered to each purchaser of Universal common stock unless the purchaser qualifies as an accredited investor. D. Universal filing of a registration statement with the SEC does not automatically result in compliance with the "blue-sky" laws of the states in which the offering will be made.

D State statutes regulate the issue and sale of securities in addition to federal requirements. Therefore, filing a registration statement with the SEC for an interstate offering does not automatically result in compliance with "blue-sky" laws of the State. Compliance with state laws is required in addition to federal laws.

Which of the following is true regarding the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010? A. Securities created by buying and bundling student loans are exempt from the provisions of the Act. B. Non-accelerated filers are exempt from the provisions of the Sarbanes-Oxley Act that require the annual report to include a report by management on internal control over financial reporting. C. Financial advisors to states and local governments with respect to the issuance of municipal bonds are exempt from the provisions of the Act. D. A securitizer of asset-backed securities must retain an economic interest in a material portion of the credit risk for any securities that it conveys

D The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act) requires a securitizer of asset-backed securities to retain an economic interest in a material portion of the credit risk for any securities that it transfers, sells, or conveys to a third party. The Dodd-Frank Act applies to securities created by buying and bundling loans (including residential mortgage loans, commercial loans, and student loans). The Dodd-Frank Act exempts non-accelerated filers from the provisions of the Sarbanes-Oxley Act that require auditor attestation on management's report on internal control over financial reporting; management still must present the report. Financial advisors to states and local governments with respect to the issuance of municipal bonds are subject to the provisions of the Act.

Imperial Corp. is offering $450,000 of its securities under Rule 504 of Regulation D of the Securities Act of 1933. Under Rule 504, Imperial is required to A. Provide full financial information to all nonaccredited purchasers B. Make the offering through general solicitation C. Register the offering under the provisions of the Securities Exchange Act of 1934 D. Notify the SEC within 15 days

D The Securities Act of 1933 allows certain exemptions that may either relate to the security being offered (exempt securities) or the way in which the security is being offered (exempt transactions). Regulation D establishes two important exempt transactions in Rules 504 and 506. Under Rule 504 of Regulation D, offerings up to $5MM are to be completed within 12 months and one of the requirements is that the SEC must be notified within 15 days of the first sale.

The partnership of Rodgers & Higgs, CPAs, performed audits of Alt Corp., a publicly-traded company, for the past several years. After issuing the current year's audit report, the CFO of Alt confessed to having committed fraud against Alt. Under which of the following statutes would the investors most likely bring suit against Rodgers & Higgs? A. Securities Act of 1933, if they can prove ordinary negligence B. Securities Act of 1933, if they can prove gross negligence C. Securities Exchange Act of 1934, if they can prove ordinary negligence D. Securities Exchange Act of 1934, if they can prove scienter

D The Securities Act of 1933 applies to the original issuance of securities. The Securities Exchange Act of 1934 focuses on secondary offerings of securities and filings pertaining to existing securities. The Securities Exchange Act of 1934 contains anti-fraud provisions. Fraud involves scienter (intent to deceive), not mere ordinary negligence.

Which of the following transactions is subject to registration requirements of the Securities Act of 1933? A. The public sale of stock of a trucking company regulated by the Interstate Commerce Commission B. A public sale of municipal bonds issued by a city government C. The issuance of stock by a publicly traded corporation to its existing shareholders because of a stock split D. The public sale by a corporation of its negotiable 10-year notes

D The Securities Act of 1933 exempts certain securities from its registration requirements. A corporation's 10-year notes offered in a public sale are not exempt. Exempted securities include those issued by domestic governments; securities regulated by another government agency, such as the Interstate Commerce Commission; and securities involved in no-sale transactions.

With regard to an offering of common stock requiring registration under the Securities Act of 1933, A. The SEC will attempt to pass on the investment value of the common stock before approving the offering. B. The registration statement is automatically effective when filed with the SEC. C. The issuer may make sales 10 days after filing the registration statement. D. The issuer would act unlawfully if it were to sell the common stock without providing the investor with a prospectus.

D The registration requirements of the Securities Act of 1933 are intended to provide investors with the information necessary to evaluate the merits of the offering. To this end, a prospectus must be provided to every buyer. The SEC does not attempt to determine the investment value of the securities offered. The registration statement is effective if not objected to by the SEC within 20 days after its filing. No sales are permitted until the registration statement is accepted by the SEC; however, verbal "offers to sell" are permitted during the 20-day waiting period.

Under Regulation D, Rule 504, of the Securities Act of 1933, which of the following statements is correct regarding a $3,000,000 stock offering sold only to accredited investors? A. The issuer may sell the stock to only 35 accredited investors. B. The issuer may make the offering through a general advertising. C. The issuer must supply all accredited investors with financial information. D. The issuer must notify the SEC within 15 days after the first sale of the offering.

D Transactions under Regulation D of Rule 504 are exempt from the registration requirements of The Securities Act of 1933 To qualify under Regulation D of Rule 504, the transactions must have the following features: (1) Offering up to $5 million to be completed within 12 months (2) Offer can be made to unlimited accredited and non-accredited investors. (3) SEC must be notified within 15 days of first sale (4) Advertising is allowed only to accredited investor if certain conditions are met (5) No need to provide financial information to investors (6) ) Resale to accredited investors is permitted, if certain conditions are met (7) Cannot use if required to report under the 1934 Act Based on the above, a $3 million stock offering sold only to accredited investors qualifies as a transaction subject to Regulation D, Rule 504. Additionally, to be valid, the issuer must notify the SEC within 15 days after the first sale.

For federal estate taxation, the alternate valuation date A. If elected on the first return filed for the estate, may be revoked in an amended return provided that the first return was filed on time. B. Is required to be used if the fair market value of the estate's assets has increased since the decedent's date of death. C. Must be used for valuation of the estate's liabilities if such date is used for valuation of the estate's assets. D. Can be elected only if its use decreases both the value of the gross estate and the estate tax liability.

D Under §2032, the alternative valuation date can be used to value a decedent's estate only if the election will decrease the value of the estate and if it will reduce any estate tax liability. The election can be used only if the election will decrease the value of the estate. The election, once made, is irrevocable and cannot be changed by filing an amended return. The election applies only to the gross estate and not to the net value of the estate (e.g., after liabilities and allowable deductions).

Acme Corp. intends to make a public offering in several states of 250,000 shares of its common stock. Under the Securities Act of 1933, A. Acme must sell the common stock through licensed securities dealers. B. Acme must, in all events, file a registration statement with the SEC because the offering will be made in several states. C. Acme's use of any prospectus delivered to an unsophisticated investor must be accompanied by a simplified explanation of the offering. D. Acme may make an oral offer to sell the common stock to a prospective investor after a registration statement has been filed but before it becomes effective.

D When a registration statement is filed with the SEC, the SEC has 20 days to reject the statement. During this 20-day waiting period, no sales are permitted until the registration statement is accepted by the SEC; however, verbal offers to sell are permitted during this 20-day waiting period. The issuer can sell its own securities without employing a securities dealer. There are provisions in the act, in some instances, excusing the filing of a registration statement for a public offering (see Regulation A). Hence a filing of the registration statement is not required in all events. The act has provisions for issuance of various types of information to a prospective buyer, such as Regulation A offering circulars; however, the act does not require that a simplified explanation of the offering be included along with the prospectus.