QUESTION 39

1. Which of the following dependent children have income subject to the so-called kiddie tax?

   --- Marcia, age 25 and a full-time student, earned $1,000 in wages and $2,700 in interest income.

   --- Jan, age 17, earned $4,000 in capital gains from stock investments.

   --- Cindy, age 16, earned $5,000 in wages and $1,500 in interest income from a savings account.

   		Marcia only.
   		Cindy only.
   		Jan only.
   		Marcia and Jan only.
   		Marcia, Jan, and Cindy will all have income subject to the kiddie tax.

QUESTION 40

1. To avoid the tax preparer penalty for understatement of the tax liability in a disclosed position, the taxpayer's position on the return must, at a minimum

   		have a reasonable basis.
   		be more likely than not (more than 50% chance) to succeed.
   		have substantial authority.
   		not be frivolous.
   		have a realistic possibility of success.