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Jacob is single with no dependents. During 2017, he has $50,500 of taxable income.
He also has $29,250 of positive AMT adjustments and $12,500 of tax preferences.
Jacob does not itemize his deductions but takes the standard deduction.
Calculate his AMTI.
 
$92,250.
$102,650
$98,600.
$96,300.
   
Agnes and Aunt Sue each invested $152,000 cash in the A&S Partnership, and each received a 50% interest in the partnership.
To finance her investment in the partnership, Agnes borrowed $65,400 on a full recourse basis from her partner, Aunt Sue.
Which of the following is correct?
 
 
Agnes’s at-risk amount in her partnership interest is $152,000.
Agnes’s at-risk amount in her partnership interest is $86,600
Aunt Sue’s at-risk amount in her partnership interest is $86,600.
Aunt Sue’s at-risk amount in her partnership interest is $152,000.
   
Basil has $114,000 AGI (before any rental loss).
He also owns several rental properties in which he actively participates.
The rental properties produced a $32,500 loss in the current year.
How much, if any, of the rental loss can Basil deduct in the current year?
 
$25,500.
$0.
$18,000
$25,000.
   
Samuel is a CPA and earns $180,000 from his practice in the current year.
He also has an ownership interest in three passive activities.
Assume he is sufficiently at risk in each of the three partnerships.
In the current tax year, the activities had the following income and losses:
                                 
  Partnership A                   $ 49,000                
  Partnership B                   ( 38,000 )
  Partnership C                   ( 29,400 )
 
What is Samuel’s adjusted gross income for the current year?
 
$229,000.
$161,600.
$174,000.
$180,000
   
Which of the following increases a taxpayer's at-risk amount?
 
a. Cash distributions.
b. Property distributions.
c. Increased share of liabilities.
d. Loss items.
   
Which of the following increase(s) a taxpayer's at-risk amount?
 
a. Cash and the adjusted basis of property contributed to the activity.
b. Borrowed amounts used in the activity for which the taxpayer is
personally liable.
c. Income from the activity.
d. All of the above.
 
   
In 2021, Kirsten invested $20,000 for a 10% partnership interest (not a passive activity).
The partnership has losses of $150,000 in 2021 and $250,000 in 2022.
Kirsten's share of the partnership's losses is $15,000 in 2021 and $25,000 in 2022.
How much of the losses from the partnership can Kirsten deduct?
 
a. $0 in 2021 and $0 in 2022.
b. $15,000 in 2021 and $5,000 in 2022.
c. $15,000 in 2021 and $25,000 in 2022.
d. $20,000 in 2021 and $0 in 2022.
 
$20,000 At-risk - $15,000 allowed in 2020 - $5,000 allowed in 2021 = $0 at-risk
  Leonardo invests $10,000 cash in an equipment-leasing activity for a 15% share in the business.
The 85% owner is Rebecca, who contributes $10,000 and borrows $75,000 to put in the business.
Only Rebecca is liable for repayment of the loan. The partnership incurs a loss of $125,000 during the year.
What amount of the loss is deductible currently by Leonardo and Rebecca
(ignore passive activity loss rules)?
 
a. $0 by Leonardo and $0 by Rebecca.
b. $10,000 by Leonardo and $85,000 by Rebecca.
c. $18,750 by Leonardo and $106,250 by Rebecca.
d. $21,250 by Leonardo and $73,750 by Rebecca.
 
Leaonardo's at-risk limited to $10,000. Rebecca's is limited to $85,000.
   
Myer owns a 20% interest in a partnership (not involved in real estate) in which his at-risk amount was $50,000
at the beginning of the year. During the year, he receives a $40,000 distribution from the partnership.
The partnership produces a $160,000 loss during the year.
What is Myer's deductible loss for the year (ignore passive loss rules)?
 
a. $0.
b. $10,000.
c. $32,000.
d. $50,000.
 
Myer's loss is $32,000 (160,000 x .2) but the loss is allowed only to
the extent of his at-risk of $10,000 (50,000 - 40,000).
   
Alcott invested $20,000 for a 25% interest in a partnership (not a passive activity) on January 1, 2021.
The partnership borrowed $100,000 (with full recourse to the partners) on January 15, 2021, to cover short-term
cash flow requirements. During the year, the partnership generated a $60,000 loss. By December 31, 2021, the
partnership had paid off $20,000 of the loan. What is Alcott's at-risk amount on January 1, 2022?
 
a. $20,000.
b. $25,000.
c. $40,000.
d. $45,000.
 
$20,000 beginning at-risk + $20,000 debt (25% of 80,000) - $15,000 loss = $25,000 at-risk
   
Agnes and Aunt Sue each invested $140,000 cash in the A&S Partnership, and each received a 50% interest
in the partnership. To finance her investment in the partnership, Agnes borrowed $60,000 on a full recourse
basis from her partner, Aunt Sue. Which of the following is correct?
 
a. Agnes's at-risk amount in her partnership interest is $80,000.
b. Aunt Sue's at-risk amount in her partnership interest is $140,000.
c. Agnes's at-risk amount in her partnership interest is $140,000.
d. Aunt Sue's at-risk amount in her partnership interest is $80,000.
 
At-risk amounts does not include amounts borrowed from any person that
has an interest in the activity. Agne's at-risk is $80,000 = ($140,000 - 60,000).
   
Cindy, Casey, and Kara each invested $30,000 in a real estate venture.
The partnership borrowed $200,000 and purchased a warehouse for $290,000.
The note was secured by the building; there was no personal recourse against the partners.
What is each partner's beginning at-risk amount in the venture?
 
$96,667 each
 
(1/3 x 200,000) = 66,666 + 30,000 = 96,667
   
Which of the following would be considered a passive activity?
 
a. A limited partnership interest.
b. Most rental real estate activities.
c. A trade or business in which the taxpayer does not materially participate.
d. All of the above.
  Sylvester, an accountant, owns a mail-order business in which he participates.
He has one employee who works part-time in the business. Which of the following statements is incorrect?
 
a. If Sylvester participates for 600 hours Sylvester qualifies as a material participant.
b. If Sylvester participates for 120 hours Sylvester does not qualify as a material participant.
c. If Sylvester participates for 495 hours and the employee participates for 520 hours during the year,
     Sylvester qualifies as a material participant.
d. If Sylvester participates for 105 hours Sylvester probably qualifies as a material participant.
 
Participation for less than 500 hours and also his employee has participated in the activity for more hours.
   
Janel owns five small businesses, each of which has its own manager and employees.
Janel spends the following number of hours this year working in the various businesses:
 
Business A, 130 hours
Business B, 160 hours
Business C, 110 hours
Business D, 120 hours
Business E, 100 hours
 
Which of the following statements is correct?
 
a. Businesses A, B, C, D, and E are all significant participation
activities.
 
b. Businesses A, B, C, and D are all significant participation activities.
c. Janel is considered a material participant in Businesses A, B, C, and D.
d. Both b and c are correct.
 
A, B, C, and D all exceed 100 hours and in aggregate more than 500 hours.
   
Santiago is a CPA and earns $150,000 from his practice in the current year. He also has an ownership interest in three passive activities.
Assume he is sufficiently at risk in each of the three partnerships. In the current tax year, the activities had the following income and losses:
 
Partnership A $ 40,000
Partnership B (32,000)
Partnership C (24,000)
 
What is Santiago's adjusted gross income for the current year?
 
a. $134,000.
b. $144,000.
c. $150,000.
d. $190,000.
   
Nathaniel has AGI (before any rental loss) of $65,000. He also owns several rental properties in which he actively participates. The rental
properties produced a $30,000 loss in the current year. Nathaniel also has $5,000 of income from a limited partnership interest.
How much, if any, of the rental loss can he deduct in the current year?
 
a. $0.
b. 5,000.
c. $25,000.
d. $30,000.
 
$5,000 of the 30,00 is allowed to the extent of passive income.
The additional $25,000 loss is allowed because of the rental offset rule.
 
Basil has $130,000 AGI (before any rental loss). He also owns several rental properties in which he actively participates. The rental
properties produced a $30,000 loss in the current year. How much, if any, of the rental loss can Basil deduct in the current year?
 
a. $0.
b. $10,000.
c. $15,000.
d. $25,000
 
The rental offset is phased out when
AGI exceeds $100,000. 130 - 100 = $30,000 x 50% = $15,000
disallowed; $10,000 allowed.
   
During the year, Green, Inc., incurs the following research expenditures:

In-house wages, supplies, computer time              $              60,000
Paid to Blue Foundation for research                                       30,000

Green's qualifying research expenditures for the year are:
a. $60,000.
b. $75,000.
c. $79,500.
d. $90,000.
e. None of these.
   
Hunter has a $38,000 loss from an investment in a partnership in which
he does not participate. His basis in the interest is $35,000.
 
a. How much of the loss is disallowed by the at-risk rules?
 
Since he has a $35,000 at-risk basis before the loss, $35,000 of the loss would be allowed and $3,000 suspended under the at-risk rules.
 
b. How much of the loss is disallowed by the passive loss rules?
 
Assuming Hunter has no other passive income from other sources, the entire $35,000 in losses would be disallowed under the PAL rules. The
loss makes it through the at-risk rules but not the PAL rules.
   
Which, if any, of the following correctly describes the research activities credit?


a. The research activities credit is the greater of the incremental research credit, the basic research credit, or the energy research credit.
b. If the research activities credit is claimed, no deduction is allowed for research and experimentation expenditures.
c. The credit is not available for research conducted outside the United States.
d. All corporations qualify for the basic research credit.
e. None of these.
   
Jacob is single with no dependents. During 2021, he has $48,000 of taxable income. He also has $28,000 of positive AMT adjustments and
$12,000 of tax preferences. Jacob does not itemize his deductions but takes the standard deduction.
Calculate his AMTI.
 
a. $60,000.
b. $76,0000.
c. $88,000.
d. $100,550.
 
48,000 + 12550 + 28000 + 12000 = 100,550
   
Which, if any, of the following correctly describes the earned income credit?
a. Would be available regardless of the amount of the taxpayer's adjusted gross income.
b. Not available to a surviving spouse.
c. A taxpayer must have a qualifying child to take advantage of the credit.
d. Is a refundable credit.
e. None of these.
   
Rex and Dena are married and have two children, Michelle (age 7) and Nancy (age 5). During 2014,
Rex earned a salary of $24,500, received interest income of $300, and filed a joint income tax return
with Dena. Dena had $0 gross income. Their earned income credit for the year is:


a. $0.
b. $324.
c. $5,136.
d. $5,460.
e. None of these.
   
Cheryl is single, has one child (age 6), and files as head of household during 2014. Her salary for the year is
$19,500. She qualifies for an earned income credit of the following amount:


a. $0.
b. $267.
c. $3,038.
d. $3,305.
e. None of these.
   
Which of the following itemized deductions is not allowed for AMT?
 
a. Medical expenses.
b. Taxes.
c. Charitable contributions.
d. Interest on loan to purchase principal residence.
   
During 2014, Barry (who is single and has no children) earned a salary of $13,000. He is age 30.
His earned income credit for the year is:


a. $0.
b. $122.
c. $374.
d. $496.
e. None of these.
   
George and Jill are husband and wife, ages 67 and 65 respectively. During the year, they receive Social
Security benefits of $4,000 and have adjusted gross income of $11,000. Assuming they file a joint return,
their tax credit for the elderly, before considering any possible limitation due to their tax liability, is:


a. $1,125.
b. $750.
c. $450.
d. $375.
e. None of these.
   
During the year, Green Corporation (a U.S. corporation) has U.S.-source income of $750,000 and foreign income
of $500,000. The foreign-source income generates foreign income taxes of $240,000. The U.S. income tax before
the foreign tax credit is $425,000. Green Corporation's foreign tax credit is:


a. $170,000.
b. $240,000.
c. $425,000.
d. $500,000.
e. None of these.
   
Which of the following business forms may be tax conduits?


a. General partnership
b. Limited partnership
c. Publicly traded C corporation
d. S corporation
   
During the year, Purple Corporation (a U.S. Corporation) has U.S.-source income of $1,800,000 and
foreign income of $600,000. The foreign-source income generates foreign income taxes of $150,000.
The U.S. income tax before the foreign tax credit is $816,000. Purple Corporation's foreign tax credit is:


a. $112,500.
b. $150,000.
c. $204,000.
d. $816,000.
e. None of these.
   
Which of the following statements is correct with regard to the medical expense deduction?
 
a. Medical expenses are not deductible for AMT.
b. The medical expense deduction is decreased for AMT.
c. The medical expense deduction is increased for AMT.
d. The same amount of medical expenses that is deductible for regular tax purposes is deductible for AMT.
   
Raymond sells his entire interest in a rental property in which he actively participated at a gain of $18,000.
The activity has a current year loss of $5,500 and $18,500 in prior year suspended losses. During the year,
Raymond has $55,000 in salary. What is Raymond's AGI for the year?
 
a. $49,000.
b. $55,000.
c. $67,500.
d. $73,000.
   
In terms of the withholding procedures, which statement does not reflect current rules?


a. Penalties can be imposed for filing false information with respect to wage withholding.
b. An employer need not verify the number of exemptions claimed by an employee on Form W4.
c. An employee may claim fewer than the number of withholding allowances allowed, but not more.
d. In preparing the income tax return for the year, the employee is bound by the number of exemptions claimed for withholding purposes.
e. None of these.
   
Jimmy will have an adjusted gross income of $275,000 for the current tax year.
 
He would like to reduce his tax liability. Which of the following investments may reduce Jimmy's tax liability?
A) An investment in an oil and gas working interest
B) An investment in a non-publicly traded limited partnership generating losses
C) An investment in a publicly traded limited partnership generating losses
D) An investment in active participation rental real estate
   
Identify the statement below that is false.


a. If an employer is not required to withhold income taxes from an employee's wages, the wages are not taxable to the employee.
b. In certain situations, income tax withholding by an employer is voluntary.
c. For 2014, an employer must deposit with the government an amount of FICA.
d. If an excess amount of FICA has been withheld for an employee for the excess amount withheld on his or her income tax return.
e. None of these.
   
In describing FICA taxes, which (if any) of the following statements is incorrect?


a. The base amounts for 2015 probably will increase from the 2014 amounts.
b. The base amounts for the Social Security and Medicare portions are the same.
c. If both spouses work, excess FICA taxes need not result.
d. Excess FICA taxes can be claimed as an income tax credit.
e. None of these.
   
The federal personal income tax rate is


A. Integrative
B. Regressive
C. Progressive
D. Flat
   
Ken is a successful attorney with a full-time practice from which he earns a salary of nearly $500,000 a year.
Which of the following investments would be appropriate in reducing Ken's income tax liability?


I. Investment in an oil and gas working interest
II. A real estate limited partnership
III. A rental real estate general partnership in which Ken will not participate
IV. Active participation rental real estate


A) I, III, and IV
B) III only
C) I only
D) II and III
   
Which of the following statements regarding the adoption expenses credit is not true?


a. The adoption expenses credit is a nonrefundable credit.
b. The adoption expenses credit starts to be phased out in 2014 beginning when a taxpayer's modified AGI exceeds $197,880.
c. No adoption expenses credit is available in 2014 if a taxpayer's modified AGI exceeds $237,880.
d. The adoption expenses credit is limited to no more than $13,000 per eligible child in 2014.
e. All of these statements are true.
   
George and Martha are married and file a joint tax return claiming their two children, ages 10 and 8 as dependents.
Assuming their AGI is $119,650, George and Martha's child tax credit is:


a. $0.
b. $1,000.
c. $1,500.
d. $2,000.
e. None of these.
   
Which of the following is included in taxable income?


A. An inheritance
B. A gift received
C. Child support payments received
D. Alimony received
   
Tax credits reduce


A. Tax liability
B. Adjusted gross income
C. Tax withholding
D. Taxable income
   
A capital gain results from

A. Selling an asset for less than the purchase price
B. Holding an asset that has appreciated
C. Selling an asset at the same price as the purchase price
D. Selling an asset for more than the purchase price
   
Which of the following is(are) an objective of the federal income tax law?


1. Revenue raising
2. Economic growth
3. Social policy


A. 1 only
B. 1 and 2
C. 1 and 3
D. 1, 2, and 3
   
Rustin is a married taxpayer who files jointly with his spouse and has a short-term capital loss of $300 and a
long-term capital loss of $3,800 in the current year. What deduction will Rustin be able to take from the
ordinary income in the current year?


A. $1,500
B. $3,000
C. $3,800
D. $4,100
   
A taxpayer may incur an AMT liability if he has which of the following items of deduction or income?


1. State and local income taxes
2. Straight-line depreciation
3. Exercise of incentive stock options


A. 1 and 3
B. 2 only
C. 2 and 3
D. 1, 2, and 3
   
Which of the following is included in gross income?


A. Alimony received
B. Interest received from municipal bonds
C. Life insurance death benefits received
D. Child support payments received
   
Which of the following is(are) considered ordinary income?


1. Salaries
2. Qualified dividends from a stock
3. Rent income to a partnership


A. 1 only
B. 1 and 3
C. 1, 2, and 3
D. None
  In determining adjusted gross income, the taxpayer may reduce gross income by which of the following?


A. 100% of self-employment tax paid
B. Alimony received from an ex-spouse
C. Qualifying moving expenses
D. Medical expenses
   
Which of the following would be considered a capital asset?


A. Copyrights or creative works held by the creator
B. Securities held for investment
C. Accounts or notes receivable arising in the ordinary course of a trade or business
D. Inventory or property held for sale to customers in the ordinary course of a trade or business
   
For a gain to be afforded preferential treatment, the asset must be


1. A capital asset
2. Sold or exchanged
3. Held for at least 6 months


A. 1 and 2
B. 1 and 3
C. 2 and 3
D. 1, 2, and 3
   
Realizing that providing for a comfortable retirement is up to them, Jim and Julie commit to making regular
contributions to their IRAs, beginning this year. Consequently, they each make a $2,000 contribution to their
traditional IRA. If their AGI is $35,000 on their joint return, what is the amount of their credit for certain
retirement plan contributions?


a. $2,000
b. $1,000
c. $400
d. $200
e. None of these
  Which of the following is allowed a standard deduction?


A. A married person filing a separate return, if his spouse itemizes deductions
B. A nonresident alien
C. An individual filing a tax return for a period of less than 12 months
D. Children under age 18
   
Which of the following issues does not need resolution in an employer's effort to comply with employment tax payment requirements?


a. Ascertaining which employees and wages are covered by employment taxes and are subject to withholding for income taxes.
b. Arriving at the amount to be paid and/or withheld.
c. Reporting and paying employment taxes and income taxes withheld to the IRS on a timely basis through the use of proper forms.
d. Each of the above issues needs to be resolved.
e. None of these is relevant to the employer.
  An employer calculates the amount of income tax withheld from salary or wages based on the information an
employee provides on the following form:


a. Form W-2.
b. Form W-3.
c. Form W-4.
d. Form 941.
e. None of these.
   
Bob and Sally are married, file a joint tax return, have AGI of $112,000, and have two children. Del is beginning her freshman year at State College during Fall 2014, and Owen is beginning his senior year at Southwest University during Fall 2014. Owen completed his junior year during the Spring semester of 2013 (i.e., he took a "leave of absence" during the 2013-2014 school year). Both Del and
Owen are claimed as dependents on their parents' tax return. Del's qualifying tuition expenses and fees total $5,000 for the Fall semester, while Owen's qualifying tuition expenses were $6,100 for the Fall 2014 semester. Del's room and board costs were
$3,200 for the Fall semester.
Owen did not incur room and board costs since he lived with his aunt and uncle during the year. Full payment is made for the
tuition and related expenses for both children at the beginning of each semester. In addition to the children's college expenses,
Bob also spent $3,000 on professional education seminars during the year in order to maintain his license as a practicing dentist.
Bob attended the seminars during July and August 2014. Compute the available education tax credits for Bob and Sally for 2014.


a. $3,100
b. $5,000
c. $5,480
d. $5,600
e. None of these
   
Which of the following statements is true regarding the education tax credits?
a. The lifetime learning credit is available for only graduate degrees.
b. The American Opportunity credit permits a maximum credit of 20% of qualified expenses up to $10,000 per year.
c. The American Opportunity credit is calculated per per eligible student.
d. Continuing education expenses do not qualify for either education credit.
e. None of these statements is true.
   
Joel just purchased an interest in a partnership. As a limited partner, he will not participate in
management decisions of the partnership. Which of the following statements regarding the tax
implications of this arrangement is CORRECT?


I. Joel must take into consideration the at-risk rules.
II. Joel is subject to the passive activity loss rules.


A. I only
B. II only
C. Both I and II
D. Neither I nor I
   
Janet has carryover losses of $25,000 from a RELP. Her AGI is $200,000 in the current year.
She still owns her interest in the RELP. What can Janet do to use her RELP losses against her other income in the current year?


I. Sell her entire interest in the RELP to an unrelated party.
II. Buy an MLP that generates income.


A. I only
B. II only
C. Both I and II
   
Which of the following statements regarding the full or partial sale of a passive activity interest
in a particular parcel of real estate is or are CORRECT?
I. Suspended amounts and credits cannot be used when there is a partial sale.
II. Suspended amounts and credits may only be used to offset income for the current passive activity.


A. I only
B. II only
C. Both I and II
D. Neither I nor II
   
Joseph, age 54 and single, earns a salary of $190,000 working for a manufacturing company.
He is an avid saver and over the years has amassed an investment portfolio of $2 million.
He expects the portfolio to appreciate in value at an average rate of 8% per year. Last year, he received
dividends and interest from the portfolio of $40,000. After speaking with a financial planner, Joseph
decided to invest $50,000 of his portfolio to purchase a 15% interest in a passive activity.
Operations of the activity have now resulted in a loss of $400,000, of which Joseph's share is $60,000.
How is Joseph's loss for the current year characterized for income tax purposes?

$10,000 is suspended under the at-risk rules, and $50,000 is suspended under the passive activity loss rules.
   
Joseph will be allowed to deduct only $50,000, his amount at risk. In addition, $10,000 of the loss
($60,000 total less $50,000 deductible under at-risk rules) has been suspended because of the at-risk
rules and must be carried forward. Even though Joseph has a $50,000 loss after applying the at-risk
 rules, he is still not permitted a deduction for the loss because he has no passive income.
Through application of both rules, the entire loss of $60,000 is suspended for the current tax year.
In the current year, Bob invested $50,000 for a 20% interest in a partnership in which he was a material
participant. The partnership incurred a loss, and Bob's share was $75,000.
Which of the following statements regarding Bob's investment is NOT correct?


Because Bob has only $50,000 of capital at risk, he can never deduct more than $50,000 against his other income.
   
Marital status affects the amount of Social Security tax paid.
 
False
   
An exchange is a transfer of property for an amount of money or money equivalent that is fixed or determinable.
 
False
   
Like-kind exchanges are generally taxable transactions.
 
False
   
A capital asset is held long-term if the taxpayer owned the asset for one year.
 
False
   
Long-term capital gains are generally taxed at a maximum rate of 20%, unless the individual is in the
15% ordinary income tax bracket, in which case the capital gain is taxed at a maximum rate of 15%.
 
False
   
If an asset held long-term is a collectible, such as a work of art (as defined in Section 1201), the
maximum capital gain rate is 28%.
True
   
A short-term capital gain receives no special treatment and is taxed as ordinary income.
 
True
   
The objective of tax planning is to pay the lowest tax legally permissible consistent with overall
financial planning objectives.
 
True
   
Taxpayers may be eligible to use lower tax rates when thy incur a gain upon the disposition of certain
types of assets, known as capital assets.
 
True
   
The federal personal income tax tables are graduated; the rates increase as taxable income increases.
 
True
   
There is no limit on the amount of an employee's salary that is subject to Social Security tax.
 
False
   
The failure-to-pay penalty is half of 1% of the tax shown for each month that is not paid, up to a maximum penalty of 25%.
 
True
   
The accuracy-related penalty is a penalty of 35% of the portion of the tax underpayment attributable to
negligence, substantial understatement of tax, or substantial valuation misstatement.
 
False
   
A taxpayer who actively participates in a hobby activity may deduct up to $25,000 of losses annually.
 
False
   
When an employer contributes to a qualified retirement plan on behalf of an employee, the employee is not
required to include the employer's contribution in gross income.
 
True
   
If a vacation home is rented to others for 14 days or less during the year, any rental income from the home is
excludable from the taxpayer's gross income, no matter how much rent is charged.
 
True
   
Filing status is determined as of the last day of the tax year.
 
True
   
Taxpayers cannot assume that the IRS will apply a letter ruling to them, even if they engage in the same
transaction set out in the letter ruling.
 
True
   
Examples of earned income include wages, royalties, and dividends.
 
False
   
Technical Advice Memoranda give advice or guidance in memorandum form and are furnished by the National
Office of the IRS.
 
True
   
The failure-to-file penalty is 5% of the amount of tax required to be shown on the return for each month or
fraction of a month that failure continues, up to a maximum penalty of 15%.
 
False