Chapter 1 Flashcards
How long is the carry forward for charitable contributions?
Can be carried forward 5 years.
When is the mid-quarter convention used?
For depreciation when 40% or more of all purchases occur in 4th quarter.
When are scholarships not taxable?
When they are not in return for services rendered,
AND
The money is used only for tuition and books
Note: Scholarships for room and board are includable in income.
How much social security income can be taxed for individuals in higher income brackets?
Up to 85%
Adoption expenses - Are they deductible?
NO, they are not deductible. However tax benefits are available through the adoption CREDIT.
Which IRA contributions are deductible?
Traditional IRA = deductible
Roth IRA = not deductible
On August 1, Neptune Fisheries contracted in writing with West Markets to deliver to West 3,000
pounds of lobsters at $4.00 a pound. Delivery of the lobsters was due October 1 with payment
due November 1. On August 4, Neptune entered into a contract with Deep Sea Lobster Farms
which provided as follows: “Neptune Fisheries assigns all the rights under the contract with West
Markets dated August 1 to Deep Sea Lobster Farms.” The best interpretation of the August 4
contract would be that it was:
An assignment of rights and a delegation of duties by Neptune. An assignment rebuttably is presumed to be an assignment of rights and a delegation of duties. Here, assignee Deep Sea Lobster Farms presumably could carry out the delivery duties.
Generally, contract rights are assignable under option contract rights or malpractice insurance policy rights. True or False?
Contract rights = true. Malpractice Insurance Policy rights = False. Contract rights generally are assignable unless the right is personal to the promisee or the duty of the obligor or the obligor’s burden or risk is materially increased. If neither of these are present, option contract rights are clearly assignable. Malpractice insurance policy rights normally are not assignable since the assignee might subject the insurance company to a greater risk, and thus, the insurance company would not agree to such an assignments. It is first necessary to determine who possesses the policy rights. If the right is viewed as being owed by the insurer to the insured, the insured could not assign their rights to another without violating the rules as to assignment. If, however, the right is viewed as being owed by the insurer to the insured, the insured could not assign their rights to another without violating the rules as to assignment. If, however, the right is viewed as being owed by the insurer to a claimant injured by the insured’s malpractice, the claimant’s right to receive compensation should be assignable by the claimant.
Egan contracted with Barton to buy Barton's business. The contract provided that Egan would pay the business debts Barton owed Ness and that the balance of the purchase price would be paid to Barton over a ten-year period. The contract also required Egan to take out a decreasing term life insurance policy naming Barton and Ness as beneficiaries to ensure that the amounts owed Barton and Ness would be paid if Egan died. Barton's contract rights were assigned to Vim, and Egan was notified of the assignment. Despite the assignment, Egan continued making payments to Barton. Egan died before completing payment and Vim sued Barton for the insurance proceeds and the other payments on the purchase price received by Barton after the assignment. To which of the following is Vim entitled? Payments on Insurance purchase price proceeds a. No Yes b. No No c. Yes Yes d. Yes. No
(c) Assignment is the transfer of a right under a contract by one person to another. If the obligor has notice of the assignment, s/he must pay the assignee, not the assignor. The contract between Barton and Egan provided for both payments on the purchase price and the insurance policy in case of Egan’s death. Because Barton assigned his contract rights to Vim, Vim was then entitled to payments on the purchase price and the insurance proceeds. Since Barton received payments on the purchase price and insurance proceeds after the assignment, Vim is entitled to sue Barton for these amounts.
