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Table of Contents     Cover     Featured Article

MCLE Test and Answer Sheet

Test No. 80: Staying Clean  (January 2000 LA Lawyer)

Instructions for Obtaining MCLE Credits
The Los Angeles County Bar Association certifies that this activity has been approved for Minimum Continuing Legal Education credit by the State Bar of California in the amount of 1 hour.


1.Study the CLE article in this issue.


2.Answer the test questions by marking the appropriate boxes. Each question has only one answer. Photocopies of this answer sheet may be submitted; however, this form should not be enlarged or reduced.

3.Mail the answer sheet and the $15 testing fee ($20 for non-LACBA members) to:
Los Angeles Lawyer
MCLE Test
P.O. Box 55020
Los Angeles, CA 90055 
Make checks payable to Los Angeles Lawyer.

4.You can also fill in the test form and submit it directly to LACBA by clicking "Submit." To submit your test answers online you will need to pay by credit card. After submitting your answers you will be presented with a screen requesting payment information. This information will be submitted in a secure mode which will allow you to safely transmit your credit card number over the Internet. If you prefer not to pay by credit card, please print this answer sheet and submit your responses by regular mail.

5.Within six weeks, Los Angeles Lawyer will return your test with the correct answers, a rationale for the correct answers, and a certificate verifying the CLE credit you earned through this self-assessment activity.

6.For future reference, please retain the CLE test materials returned to you.
Test Sheet 
Mark your answers to the test by clicking next to your choice.  All questions must be answered.  Each question has only one answer. This test is worth 1 hour of credit.*

1. Environmental remediation or compliance costs generally are treated as repairs for tax purposes.
True.
False.

2. For environmental repairs, taxpayers bear the burden of justifying expense deductions, not capital treatment.
True.
False.

3. The "put or keep" test is a formula for:
A. Determining whether certain expenditures qualify as personal or business.
B. Determining whether a repair to real property was efficiently made.
C. Determining whether a cost incurred to repair real property keeps the taxpayer in a specific tax bracket or puts the taxpayer in another tax bracket.
D. Determining whether an expenditure for a repair of real property must be capitalized.

4. A taxpayer presents evidence that environmental remediation costs increase a property's value by a factor of two times the amount of the cost of the remediation. This evidence:
A. Has little relevance in determining whether the expenditure is deductible.
B. Is strong evidence that the expenditure ought to be capitalized.
C. Is one factor among others in determining when the expenditure can be deducted.
D. None of the above.

5. Under which of the following circumstances does Internal Revenue Code Section 198 permit taxpayers to expense environmental remediation expenditures?
A. All remediation situations.
B. Remediation of a really dangerous site.
C. Remediation of a site that is on the CERCLA National Priorities List.
D. Remediation of a site in an area targeted as a poverty area by a state agency.

6. Deductions under Internal Revenue Code Section 198 are recaptured as ordinary income on the sale of the property.
True.
False.

7. Pursuant to Revenue Procedure 98-17, the Internal Revenue Service generally will refuse to respond to requests for guidance in connection with the deductibility of proposed environmental remediation costs.
True.
False.

8. Termite damage generally is treated as a casualty loss.
True.
False.

9. Casualty losses cannot be taken for tax purposes:
A. Unless the loss is sudden.
B. If the loss is caused by progressive deterioration from a steadily operating cause.
C. Until there is no prospect of recovery or reimbursement.
D. All of the above.

10. Which of the following statements are true about expenditures made to comply with governmental regulations?
A. They are treated as capital in nature more often than not-even though they do not prolong the life of the property.
B. They are always treated as expenses for tax purposes.
C. They are not deductible under Internal Revenue Code Section 162(f).
D. None of the above.

11. Sellers and buyers of real property are free to allocate responsibility for environmental matters in their purchase-and-sale contracts.
True.
False.

12. If a seller of real property indemnifies the buyer for environmental remediation, the seller can offset the anticipated cost of the remediation against the profit generated by the sale in the year of sale.
True.
False.

13. What are a seller's options for expense reduction if the seller satisfies retained liability for environmental remediation?
A. The seller can take an expense deduction for the entire cost of the remediation in the year of sale if the remediation takes place in that year.
B. The seller can take an expense deduction for the entire cost of the remediation in a later year when the expenditure occurs.
C. The seller is precluded from ever taking an expense deduction for the remediation cost by Internal Revenue Code Section 1341.
D. None of the above.

14. A seller is better served for tax purposes by reducing the purchase price of real property than by retaining express liability for remediation costs.
True.
False.

15. Even if a buyer assumes liability for environmental remediation, a seller remains potentially liable for environmental cleanup under CERCLA.
True.
False.

16. A buyer assumes liability for environmental matters and later performs the remediation. Which of the following statements are true as a result of the buyer's actions?
A. The buyer must capitalize the remediation costs.
B. The seller is charged with receipt of increased sales price in the year of sale.
C. The buyer is entitled to expense the remediation costs when the costs are incurred.
D. None of the above.

17. Lessees can deduct repair expenditures but cannot capitalize the cost of new improvements.
True.
False.

18. Internal Revenue Code Section 109 requires landlords to take into income at the end of a lease the value of improvements made by a tenant during the lease term.
True.
False.

19. A lease that allocates to tenants the responsibility to remediate environmental matters known to exist at the commencement of the lease term may also:
A. Allow the tenant to deduct the cost of the remediation as additional rent.
B. Allow the tenant to capitalize the cost of remediation and recover the cost by depreciation over the life of the lease.
C. Require the landlord to take into account the remediation cost as additional rent.
D. All of the above.

20. Landlords that remediate contamination caused by tenants after the lease term has expired are required to capitalize the cost of the remediation.
True.
False.

Address and Billing 
After submitting your answers you will be asked to enter your name, address, and payment information on the next screen. Once you have submitted the current form, you will be switched to a secure mode which will allow you to safely transmit your credit card number over the Internet.

If you do not wish to complete this transaction over the Internet you should print this page and send it to the address listed in Step 3 of the instructions at the top of this page.

Before hitting the "Submit" button please verify that all questions have been answered.


*The Los Angeles County Bar Association has been approved as a continuing legal education provider of Minimum Continuing Legal Education credit by The State Bar of California. This self-assessment activity will qualify for Minimum Continuing Legal Education credit by The State Bar of California in the amount of one hour.

   
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