Deck 7 Flashcards
With FOB place of shipment contracts, when does the risk of loss pass to the buyer?
When the goods are delivered to the carrier
The individual partner rather than the partnership can make what type of election?
Whether to take a deduction or credit for taxes paid to foreign countries.
Most elections that affect the calculation of taxable income of a partnership are made by the partnership itself rather than by an individual partner. For example, the elections as to methods of accounting, methods of depreciation and the Section 179 expensing of a limited amount of depreciable property, the election not to use installment method accounting, and similar elections are made by the partnership and apply to all partners. However, individual partners can make the election to take a deduction or a credit for taxes paid to foreign countries.
Under the Sales Article of the UCC, what are some examples of warranties and features of them?
Conformity of goods to sample: Under the UCC, any affirmation of fact or promise constitutes an express warranty. Any model, sample, or description also gives rise to an express warranty that the goods will be in conformity with the sample, model, or description.
Merchantability: is an implied warranty that arises in every sale of goods by a merchant. Among other things, it is a warranty that the goods sold will be fit for their ordinary purposes.
Fitness for a particular purpose: arises when a seller knows of a particular purpose for the goods being sold and the buyer relies on the seller to choose goods suitable for that purpose. It is an implied warranty and not an express warranty.
What can an S corporation deduct?
Compensation of officers?
Foreign income taxes?
charitable contributions within the % of income limitation applicable to corporations
Net operating loss carryovers
Compensation of officers
which is an ordinary and necessary business deduction as long as it is a reasonable amount
When a partner sells his interest in a partnership, how do you calculate the amount received in the sale to be able to calculate the gain?
You would first determine what the partner receives in the sale which is typically cash and then any liabilities the purchaser is taking over.
Then to calculate gain you would take that amount - the basis the partner has in the partnership.
The gain is then a capital gain.
IF the sale had hot assets there would be an ORDINARY income or loss.
What is the correct order of applying the loss limitation rules?
Tax basis, at-risk amount, passive loss limits
What amount is taxable to a beneficiary when they receive a distribution?
The amount of estate beneficiary reports from the estate is limited by the estate’s distribution. So if the DNI is less than the amount distributed to the beneficiary, only the amount that is DNI is taxable.
How do you calculate the distribution deduction?
You would calculate DNI and then add back or remove any non taxable items (like municipal bonds expenses or income, respectively).
Then you would look at which is lower, this or actual distributions. The lower of the 2 is the distribution deduction that a trust can take in a year.
Does gross income exclude capital gains (related to trusts)?
Gross income includes gains.
Be careful with what the question asks though. Capital gains are attributable to corpus and are generally not included in DNI (unless it specifically indicates such in the facts); therefore, after being included in gross income, they would be deducted from gross income to arrive at DNI if the capital gains were attributable to corpus.
What are some medical expenses that are allowable as itemized deductions that seem ify on whether they would be included?
Drug rehabilitation treatment Emergency Room Fees Crutches Cost of wigs relating to hair loss resulting from chemotherapy treatments Hearing aid batteries
What amounts of life insurance are included in an estate for a guy?
- The face value of life insurance policies on his life (no matter who has it - outside of peter)
- The face value of life insurance policies on his life for policies that he owns (as long as he transferred them within 3 years before his death)
- Replacement value of any insurance policies he owns on other people.
Are conditional gifts included in the estate?
Any gifts given that are conditional, if the condition is not met at the date of the gifter’s death, are included in the estate at FMV?
What is needed to be considered to calculate estate transfer tax due?
The estate transfer tax due is calculated based on the taxable estate plus the decedent’s adjusted post-1976 taxable gifts.
In a situation where a citizen of a foreign company earns US dividends, how do you calculate the dividends they would receive?
The dividend is considered U.S. source income because the corporation paying the dividend is a U.S. corporation. Because the receiver is a nonresident alien, the dividend is subject to a 30 percent U.S. tax withholding: so the receiver of a 10k dividend actually receive: $10,000 – ($10,000 x 30%) = $7,000
What is a penalty that the SEC can impose on a CPA?
The SEC can suspend or permanently revoke a CPA’s right to practice before the SEC.
This can be done for a host of reasons, not only if the accountant has willfully violated the federal securities laws or regulations. Other reasons include (1) the accountant lacks the qualifications to represent others, (2) the accountant lacks character or integrity, (3) the accountant acted unethically or unprofessionally, and (4) the accountant was convicted of a felony or a misdemeanor involving moral turpitude, or (5) the accountant’s license to practice public accountancy was suspended or revoked.
The SEC cannot suspend or revoke an accountant’s license.
The SEC can impose fines of $100,000 for an individual and $500,000 for a firm.
