Fool Quiz
Tax Prep
March 18, 1998
1) Fees for which of the following are NOT an investment expense for tax purposes?
1. Tax Preparation
2. Investment Seminars
3. Safe Deposit Box
4. IRA Custodial Fees
5. Investment Magazines
2) Which tax is NOT an allowable itemized deduction for Federal tax purposes?
1. State Income Tax
2. Real Estate Tax
3. Foreign Tax
4. Auto License Fees-Value
5. Sales Taxes
3) What type of income is normally reported to you on a Form 1099G?
1. Gambling Income
2. State Tax Refunds
3. Social Security
4. IRA Distributions
5. Non-Employee Comp
4) What was the first year in which a Federal Income Tax was established?
1. 1954
2. 1849
3. 1913
4. 1861
5. 1961
5) You goofed on your Federal Individual Tax Return. What form do you file to correct it?
1. 1040 EX
2. 1040 ES
3. 1040 EZ
4. 1040 A
5. 1040 ER
6) Dues paid to this organization would NOT be deductible for tax purposes:
1. Country Club
2. Business League
3. Trade Association
4. Professional Association
5. Rotary Club
7) Income tax payable is a specific type of:
1. Receivable
2. Accrued expense
3. Asset
4. Debt instrument
5. Non-recurring expense
8) Which of the following would NOT be deemed a currently deductible investment expense?
1. Investment Magazine
2. Investment Advice Fees
3. Tax Advice Fees
4. Broker Stock Commissions
5. Safe Deposit Box Fees
9) If you receive a gift of appreciated stock, then sell it for a gain, your basis is:
1. Fair Market Value
2. Stepped Up Basis
3. Basis of the Giver/Donor
4. Zero
5. Basis plus boot paid
10) On which IRS schedule would you report your gains or losses from stock sales?
1. Schedule D
2. Schedule F
3. Form 2106
4. Schedule E
5. Schedule S
* * *
1) Investment Seminars are not considered investment expenses. You may broaden your mind all you want, but the government doesn't care. The tax law specifically bans any deduction for attending investment seminars. For those who are interested in arcane combinations of letters and numbers, the relevant ones are (IRC 274(h)(7)).
2) Sales Taxes are not an allowable itemized deduction for Federal tax purposes. The Tax Reform Act of 1986 removed sales taxes as an allowable tax deduction. If you're inclined to have a new version of the Boston Tea Party, here's a link to The Baltimore Coffee & Tea Company on the web. You can order anything from Pompadour to Wissotzky; from tea balls to tea infusers. If that doesn't generate some infusiasm for tea, we don't know what will.
3) State Tax Refund, along with some other government payments, are reported on form 1099G. The G is for "grin," which is what you do when you get it.
4) Congress passed the first tax law as an emergency measure in 1861 and repealed it in 1872. There was something called a 'civil war' going on then. They needed money.
5) 1040 EX is the form you use for goofage repair. IRS regulations allow you to make corrections on prior filed returns with this form. The EX stands for "EX-CUUUSE ME!"
6) Dues paid to your country club are not deductible. This law was passed in 1993. Prior to that time it was thought that golfing, tennis, and boating were an integral part of your job. Now it is only true if you're a senior executive. In any event, you can't take the deduction.
7) Income tax payable is a specific type of accrued expense. For many of us, it is also a crude and painful expense. But these were not possible answers.
8) Broker Stock Commissions MUST be added to the cost of the stock purchased. They are NOT deductible. Nya-nya-nya-nya-nyaaaa-nyaaaaaaa!
9) Stock received as a gift will generally have the same cost basis for you as for the donor. Careful with this one. If you get a pile of Microsoft shares worth $10 million, but they were bought when the stock was $2, you're going to have to pay a huge tax bill. On the other hand, you'll still have a pile left over. So go ahead and wish for that gift.
10) All stock transactions should be reported on Schedule D, "Capital Gains and Losses."
-- David Wolpe (TMF Dbunk)