. Use RIA Checkpoint to answer the following questions.

13. Richard and Monica have been married for three years, and have filed joint returns during this time period. Frank is unaware that Monica has been operating an illegal drug business out of their home. Monica has earned between $100,000 and $200,000 a year from this activity but has never reported any income on their joint returns. Richard has noticed that, even though Monica is not employed, she always has tons of money, e.g., she recently purchased a car for $120,000. However, Richard has never asked her about it (even though he has been curious). In 2023, Monica is finally caught, and arrested for operating an illegal business. As soon as she posts bail, Monica flees to another country. The IRS finds Monicas records and determines that she owes the IRS $250,000 of taxes, interest, and penalties related to her ill-gotten gains. Since Richard signed the joint returns and Monica is nowhere to be find, the IRS demands Richard pay the entire amount. Richard is aware of a something called innocent spouse relief that would excuse him from being responsible for the payment. Would Richard likely qualify for relief under this provision?

a. Yes, because Richard did not have actual knowledge of Monicas activities or income.

b. Yes, because if would be inequitable to make Richard pay and that is all he has to prove.

c. Yes, as long as Richard was not involved in the operation of the business.

d. No, because even if Richard did not have actual knowledge, he had reason to know something was going on because of Monicas extravagant spending and lack of employment.

e. No, but only because innocent spouse relief is never allowed for income from drug activities.

14. Corrine owns property valued at $330,000 with a $420,000 basis. Corrine intends to sell the property to her mother, Mika, for its FMV of $330,000. Can Corrine recognize a loss on the property when she sells it to her mother?

a. Yes, because it is being sold at its FMV.

b. Yes, mothers are not considered related parties for purposes of loss disallowance.

c. No, because mothers are considered related parties for purposes of loss disallowance under IRC 267.

d. No, because mothers are considered related parties for purposes of loss disallowance under IRC 318.

e. No, unless Corrine and Mika sign an agreement stating that the sale is bona fide.